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'The provision of arbitration will be effective even in agreements without stamp', the decision of the seven-member bench of the Supreme Court
A seven-member Constitution bench of the Supreme Court on Wednesday said that the provision of arbitration in an agreement between two parties without a stamp or with insufficient stamp is enforceable. Through this decision, the Supreme Court has cancelled the decision given by a five-member bench in April this year. A bench headed by Chief Justice DY Chandrachud delivered the unanimous verdict.
A seven-member Constitution bench of the Supreme Court on Wednesday said that the provision of arbitration in an agreement between two parties which is unstamped or has insufficient stamp is enforceable and such defect is rectifiable. This does not make the agreement invalid.
Through this decision, the Supreme Court has set aside the decision delivered by a five-judge bench in April this year and will have significant and far-reaching implications for other agreements that have arbitration provisions to resolve disputes between corporates and contracting parties.
The apex court had ruled by a 3:2 majority in the case of M/s NN Global Mercantile Pvt Ltd vs M/s Indo Unique Flame Ltd & Ors that unstamped or insufficiently stamped agreements containing arbitration provisions are not enforceable. Setting aside the said decision, a bench headed by Chief Justice DY Chandrachud delivered a unanimous verdict and said that the absence of a stamp on the agreement or insufficient stamp has nothing to do with the validity of the document as it is a remedyable defect.
