The Supreme Court of India has overruled its own controversial decision from earlier in 2023. The Court held that unstamped or inadequately stamped arbitration agreements are not void or void ab initio or unenforceable. Objections as to stamping are not to be determined by courts in proceedings to refer parties to arbitration in pending judicial proceedings or for appointment of arbitrators under Sections 8 or 11 of the Indian Arbitration & Conciliation Act, 1996 (the “Arbitration Act”). Instead, these fall to be determined by arbitral tribunals.
Close on the heels of its decision on the applicability of the group of companies doctrine in India to end the year on a pro-arbitration note, a seven-judge bench of the Indian Supreme Court has swiftly brought to a close 2023’s most talked about issue relating to arbitration in India.
The Supreme Court has thus overruled the findings of a recent five-judge bench of the Supreme Court in NN Global Mercantile v Indo Unique Flame (2023) 7 SCC 1 (“NN Global 2“) and of two previous two-judge bench decisions of the Supreme Court in SMS Tea Estates v Chandmari Tea Co (2011) 14 SCC 66 (“SMS Tea Estates“) and Garware Wall Ropes v Coastal Marine Constructions & Engg (2019) 9 SCC 209 (“Garware“).
The Supreme Court’s decision offers significant respite to commercial entities with India-related contracts by clarifying that unstamped contracts cannot hold up the appointment of arbitrators or prevent parties in proceedings from being referred to arbitration. This means that defects regarding stamping can no longer be used by parties as a tool to delay the constitution of arbitral tribunals or otherwise hinder arbitration by initiating prolonged litigation in the courts.
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