In Brief
M/s N.N. Global Mercantile filed a civil suit seeking to prevent fraudulent invocation of a bank guarantee furnished under a work order with Indo Unique Flame. Indo Unique applied under Section 8 of the Arbitration Act seeking reference to arbitration. The Supreme Court held that an arbitration agreement is a distinct, separable agreement independent of the underlying substantive contract. Non-payment of stamp duty on an unstamped work order does not invalidate the arbitration clause within it, as arbitration agreements themselves are not chargeable to stamp duty. Civil fraud allegations inter se between parties are arbitrable unless the fraud directly impeaches the arbitration agreement or involves criminal sanctions. The Court overruled SMS Tea Estates and Garware Wall Ropes on the stamp duty issue and referred a constitutional question to a five-judge bench for authoritative settlement.
The lawyer headnote and full judgment text are available to registered users.