Supreme Court Overrules its earlier decision in ‘NN Global’ case, states Unstamped Arbitration Agreements are Enforceable

Today (December 13, 2023), the Supreme Court (SC) of India ruled that ‘unstamped arbitration agreements are enforceable’. The matter was heard by a seven-judge bench of the SC consisting of Chief Justice of India DY Chandrachud, Justice JB Pardiwala, Justice Manoj Misra, Justice Surya Kant, Justice BR Gavai, Justice Sanjiv Khanna, and Justice Sanjay Kishan Kaul. The seven-judge bench overruled the judgment of the five-judge SC bench in April 2023 in the N.N. Global Mercantile Pvt. Ltd. vs. M/s. Indo Unique Flame Ltd. and Ors case which, by a 3:2 majority, held that unstamped arbitration agreements are not enforceable. While delivering the judgment today, the bench said “Parties to arbitration agreement conferred jurisdiction on the arbitral tribunal, When parties pen their signatures to arbitration agreement they are regarded to independently sign the arbitration agreement. In the process, the separability provision gives rise to the doctrine of competence. The negative aspect of the doctrine of competence is that it limits courts' interference at the referral stage and arbitral tribunal given a chance to rule on their own jurisdiction.”

The lead judgment was delivered by the CJI, Justices Pardiwala, Misra, Kant, Gavai, and Kaul whereas a separate but concurring opinion was authored by Justice Khanna. The majority opinion stated that “The court duly empowered to act under the Stamp Act if a document is not stamped. Arbitration agreement not validated by Stamp Act would not stand in law.” In a concurring opinion, Justice Khanna said that ‘unstamped agreements are not rendered void or void ab initio’. Earlier in September this year, the issue in the April 2023 judgment was referred to a seven-judge bench for reconsideration whereas after hearing the contentions, the verdict was reserved by the SC on October 12, 2023. Today, the SC bench delivered the verdict, In Re Interplay between arbitration agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, and said, “We have held reference is maintainable. We have kept curative open on facts. We have resolved questions of law. We have said section 35 of the Stamp Act is unambiguous.”