DHARMASHASTRA NATIONAL LAW UNIVERSITY JABALPUR
Academic Session (2024-2025)
B.A.LL.B. (Hons.) - VIII Semester
Alternative Dispute Resolution
Project Title:
UNDERSTANDING THE EVOLVING JURISPRUDENCE: AN ANALYSIS OF IN RE:
INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER THE
ARBITRATION AND CONCILIATION ACT, 1996 AND THE INDIAN STAMP ACT,
1899
Submitted To:
Mr. Shashank Pathak Assistant Professor (Law)
Submitted By:
Ajay Pratap Singh Maravi (BALLB/013/21)
Kanishk Meshram (BALLB/044/21)
Vivek Vibhushan Kol (BALLB/108/21)
Introduction:
In a landmark decision that reverberated across India’s legal landscape, the Indian Supreme
Court delivered a judgment on December 13, 2023, with far-reaching implications for arbitration
proceedings in the country. The eagerly anticipated judgement, by a seven-judge bench,
addressed a crucial question that had been stirring debates within the Indian arbitration bar: Does
the non-payment of stamp duty in a contract render the contained arbitration agreement
unenforceable? This ruling not only provided clarity on the stamping issue but also delved into a
myriad of other significant matters surrounding arbitration law in India. It tackled the scope of
arbitral interference, the self-contained nature of the Arbitration and Conciliation Act 1996 1, and
the delicate balance between party autonomy and arbitration referral. The present piece intends
to analyse the present case with its facts, issues and ratio.
Facts:
In the case of N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.12, (hereinafter referred
to as “N.N. Global 1”) a three-judge bench determined the enforceability of an arbitration
agreement contained in an unstamped work order. The Bench, speaking through Justice Indu
Malhotra, held that an arbitration agreement, being separate and distinct from the underlying
commercial contract, would not be rendered invalid, unenforceable, or non-existent.
Moreover, on February 20, 2020, a three-judge bench of the Supreme Court in Dharmaratnakara
Rai Bahadur Narainswamy Mudaliar Chattram vs. Bhaskar Raju3 relied on the SMS Tea Estates4
judgement and reversed a decision of the High Court which had relied on an insufficiently
stamped lease deed to refer the parties to arbitration. Although Bhaskar Raju was decided before
NN Global 1, while the reference made to the the-judge bench was still pending, review petitions
were filed in Bhaskar Raju and were also dismissed on grounds on grounds of delay as well as on
merits. Following that, on 7 December 2022, a curative petition was filed seeking a
reconsideration of Bhaskar Raju. The five-judge bench in N.N. Global Mercantile (P) Ltd. v.
Indo Unique Flame Ltd.35 (hereinafter referred as “N.N. Global 2”) answered the reference by a
majority of 3:2, wherein, it held that an unstamped instrument containing an arbitration
agreement is void under Section 2(g) of the Contract Act, 18726, and thus, an unstamped
1
THE ARBITRATION AND CONCILIATION ACT, 1996 ACT No. 26 OF 1996.
2
N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.1, 2021SCC OnLine SC 13.
3
Dharmaratnakara Rai Bahadur Narainswamy Mudaliar Chattram vs. Bhaskar Raju, 2014 SCC OnLine Kar 8629.
4
SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd (2011) 14 SCC66.
5
N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.3, MANU/SC/0445/2023.
6
THE INDIAN CONTRACT ACT, 1872 ACT NO. 9 OF 1872.
instrument, not being a contract and not enforceable in law, cannot exist in law.
Considering the larger ramifications and consequences of the decision in N.N. Global 2, the five-
judge bench referred the proceedings to a seven-judge bench. It is in this context that the
proceedings were listed before a seven-judge bench of the Hon’ble Supreme Court in the present
matter, titled: “In Re: Interplay Between Arbitration Agreements Under The Arbitration and
Conciliation Act 19967 and The Indian Stamp Act 18998.9
Issues:
The primary issue before the Court was whether an Arbitration Agreement would be non
existent, unenforceable, or invalid if the underlying contract is not stamped. Further, In view of
the principle of competenz-competenz enshrined under section 16 of the Arbitration Act 10, the
question was whether that the validity of an agreement including the issue of stamping shall be
determined by an arbitrator or the court.
Judgement and the Ratio:
The Supreme Court made it clear that non-payment or inadequate payment of stamp duty will
not render the instrument invalid, though it shall be inadmissible in law. It concluded that:
Agreements that are not stamped or are inadequately stamped are inadmissible in
evidence under s35 of the Indian Stamp Act 1899 (“Stamp Act”)11 and that such
agreements are not rendered void or void ab initio (ie legally null from the start) or
unenforceable.
Non-stamping or inadequate stamping is a curable defect.
Any objection relating to stamping shall not fall for determination under sections 8
(Power to refer parties to arbitration)12 or 11 (Appointment of arbitrators)13 of the Indian
Arbitration and Conciliation Act, 1996 (“Indian Arbitration Act”).
Any objections in relation to the stamping of the agreement fall within the ambit of the
arbitral tribunal.
7
THE ARBITRATION AND CONCILIATION ACT, 1996 ACT No. 26 OF 1996.
8
THE INDIAN STAMP ACT, 1899, § 35 ACT NO. 2 OF 1899.
9
In Re: Interplay Between Arbitration Agreements Under The Arbitration and Conciliation Act 1996 9 and The
Indian Stamp Act 1899, MANU/SC/1325/2023.
10
THE ARBITRATION AND CONCILIATION ACT, § 16, 1996 ACT No. 26 OF 1996.
11
THE INDIAN STAMP ACT, 1899 ACT NO. 2 OF 1899.
12
THE ARBITRATION AND CONCILIATION ACT, § 8, 1996 ACT No. 26 OF 1996.
13
THE ARBITRATION AND CONCILIATION ACT, § 11, 1996 ACT No. 26 OF 1996.
The Supreme Court looked at the differences between an agreement's voidness and
inadmissibility. It was noted that the question of admissibility concerns whether a court may use
a document to make decisions in a case, but the question of void agreements concerns whether or
not they may be enforced in a court of law.
The court further decided that any challenge about stamping is within the purview of an arbitral
tribunal and that stamping is a jurisdictional issue. As a result, the court will not discuss
stamping while awarding interim measures under section 9 of the Indian Arbitration Act (Interim
measures, etc., by Court)14. While applying harmonious construction of the Indian Arbitration
Act, the Indian Contract Act 187215 and the Stamp Act, the court emphasised that the Stamp Act
should not be used to arm litigants with weapons of technicality to delay the adjudication of a
matter.
Critical Analysis:
The focal point of the dispute presented before the Court revolves around the nature of
arbitration agreements, often integral components of larger instruments left either unstamped or
insufficiently stamped. Often, this poorly stamped underlying contract led to arguments claiming
the arbitration agreement was unenforceable. The latest ruling essentially reaffirms the stance put
forward in NN Global 1 and is consistent with the dissenting opinions expressed by Justice
Hrishikesh Roy (particularly with regard to his dual viewpoint or two-pronged perspective) and
Justice Rastogi in NN Global 2. The arbitration agreement and the underlying contract were
clearly distinguished by the Supreme Court in NN Global-1, wherein the Court determined that
the inadequate stamping of these agreements was a curable defect. It should be emphasised that
Justice Roy's earlier dissent reappears as the majority in In Re: The Interplay, highlighting the
essential idea of judicial non-interference in arbitral procedures, which is consistent with the
Arbitration Act and the UNCITRAL Model Law.
The judgement expands the competenz-competenz rule16, giving arbitral tribunals the authority
to judge on disputes arising from incorrectly stamped arbitration agreements. This is a major
judicial innovation. This expansion is made possible by a lenient reading of Stamp Act sections
14
THE ARBITRATION AND CONCILIATION ACT, § 9, 1996 ACT No. 26 OF 1996
15
THE INDIAN CONTRACT ACT, 1872 ACT NO. 9 OF 1872
16
. Competence-Competence Doctrine in Indian Arbitration Law Jurisprudence: An In-Depth Analysis by Vasanth
Rajasekaran* and Harshvardhan Korada** Cite as: 2023 SCC OnLine, Last Vsited 9th March 2025
https://www.scconline.com/blog/post/2023/11/01/competence-competence-doctrine-indian-arbitration-law-jurisprudence-
in-depth-analysis/.
3317 and 3518, which acknowledge that the arbitral tribunal is qualified to hear cases originating
from these agreements because it is an entity with jurisdiction derived from the "consent of
parties." This is in line with Justice Roy's dissenting opinion, which stated that the Arbitration
Act's basic principles support the idea of reducing the judicial interference in the arbitral
procedure.
It is to be noted that the present judgement aligns with the international stance on the matter as
well. For example, Section 7 of the UK's Arbitration Act, 199619 states that an arbitration
agreement that is or was intended to be a part of another agreement (written or oral) will not be
deemed invalid, non-existent, or ineffective because the other agreement is invalid, did not form,
or is no longer effective. Instead, it will be treated as a separate agreement for the purposes of
this analysis. The UK Court of Appeal's ruling in Harbour Assurance Co. Ltd. v. Kansa General
International Insurance Co. Ltd.,20 which holds that the arbitration agreement is still enforceable
even in the event that the underlying contract is void, is a notable decision supporting this
position in the country. Further, in Buckeye Check Cashing, Inc. v. Cardegna,21 the United States
Supreme Court emphasised the separability of an arbitration clause from the rest of the contract.
This ruling clarifies the legal situation and makes a distinction between an agreement or other
document that is admissible in evidence and one that cannot be legally enforced in a court of law
due to inadequate or non-stamping.
An expert group was established by the Indian government to suggest changes for strengthening
the arbitration sector in India. This ruling also demonstrates the significance being placed on
arbitration as a field and is a determined attempt to position India as a forefront location for
international arbitration. Overall, the Supreme Court has favoured a reasonable and realistic
interpretation of the law that takes into account contemporary economic interests and
commercial realities.
17
THE INDIAN STAMP ACT, 1899, § 33, ACT NO. 2 OF 1899.
18
THE INDIAN STAMP ACT, 1899, § 35, ACT NO. 2 OF 1899.
19
(ENGLISH) ARBITRATION ACT 1996, , § 7, (17th June 1996)
20
Harbour Assurance Co. Ltd. V. Kansa General International Insurance Co. Ltd., [1992] 1 Lloyd's L.Rep. 81
21
UCKEYE CHECK CASHING, INC. v. CARDEGNA et al. certiorari to the supreme court of florida, No. 04–
1264.
Conclusion:
The judgment elucidated key principles of arbitration law, including the separability of
arbitration agreements, the principle of competence-competence, and the issue of judicial
interference under the Arbitration Act. It emphasized the court’s role in making prima facie
determinations of arbitration agreement existence. In essence, the Indian Supreme Court’s ruling
marked a significant milestone in arbitration jurisprudence, providing clarity on contentious
issues and reaffirming India’s commitment to fostering an arbitration-friendly environment. All
in all, in light of current economic considerations and commercial realities, the Supreme Court
has preferred a reasonable and realistic reading of the law.
Citing References
Some of the cases where the present case was relied upon has been mentioned below:
In Pawan Gupta and Ors. vs. Kamal Gupta and Ors. (22.03.2024 - DELHC):
MANU/DE/2250/2024, the Court referred to the present judgement for
understanding the scope of jurisdiction of a referral court is confined to
examination of the formal existence of an arbitration agreement.
DLF Limited vs. PNB Housing Finance Limited and Ors. (22.03.2024 - DELHC):
MANU/DE/2237/2024: Referring to the present case, the Court noticed that the
scope of inquiry by a referral court in a petition under Section 11 of the A&C Act
is confined to mere examination of the existence of an arbitration agreement.
SMS Limited vs. Uranium Corporation of India Limited (05.03.2024 - TLHC):
MANU/TL/0165/2024: The Court noted that Section 11 of the Arbitration Act
confines the jurisdiction of the Court for examination of the existence of
arbitration agreement and the applicant is only required to furnish prima facie
proof of existence of arbitration agreement. It was noted that the issue of limitation
is a jurisdictional issue and requires to be decided by Arbitral Tribunal. In support
of the aforesaid submissions, reliance is placed on the decision rendered in the
present case.
Tarun Chander Malik vs. Varahi Diamonds and Finance Ltd. (04.03.2024 -
DELHC): MANU/DE/1801/2024: The Court looked upon the doctrine of
competence-competence by leaving the issue of substantive existence and validity
of an arbitration agreement to be decided by arbitral tribunal under Section 16,
while relying upon the present case.
Ravinder Kumar Agarwal and Ors. vs. Tasleem Abdullah Chougte and Ors.
(23.02.2024 - TLHC) : MANU/TL/0146/2024: While relying on the present case,
the Court observed that an objection as to stamping does not fall for determination
under Sections 8 or 11 of the Arbitration Act and that the concerned Court must
examine whether the arbitration agreement prima facie exists.
