SC: Unstamped arbitration agreements are enforceable

A seven-judge Constitution bench of the Supreme Court overruled the verdict of a five-judge bench and held that arbitration clauses in unstamped or inadequately stamped agreements are enforceable.

A bench of CJI DY Chandrachud and Justices Sanjay Kishan Kaul, BR Gavai, Surya Kant, JB Pardiwala, Manoj Misra and Sanjiv Khanna ruled that non-stamping or insufficient stamping of an agreement has nothing to do with the validity of the document as it is a curable defect.

It said an arbitration agreement or its certified copy are not rendered void or unenforceable because it is unstamped or insufficiently stamped. “Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable. Non-stamping or inadequate stamping is a curable defect,” the bench said.

“An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The court concerned must examine whether the arbitration agreement prima facie exists. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal,” the bench said.