‘Insufficiency of stamping doesn’t make an agreement invalid’: SC

Overruling the verdict which said that unstamped or insufficient agreements, having arbitration clauses, are not enforceable, a seven-judge constitution bench headed by Chief Justice of India D Y Chandrachud held 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. Reports ETV Bharat's Sumit Saxena

New Delhi: The Supreme Court on Wednesday held the arbitration clause in an unstamped or insufficiently stamped agreement between parties is enforceable and made it clear that such a defect is curable and it would not render the contract invalid.

The apex court in April this year, in the case titled as M/s N N Global Mercantile Pvt Ltd vs M/s Indo Unique Flame Ltd. And Ors, had by majority of 3:2 held that unstamped or insufficient agreements, having arbitration clauses, are not enforceable.

Overruling this verdict, a seven-judge constitution bench headed by Chief Justice of India D Y Chandrachud, in a unanimous verdict, held 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.

The CJI, who authored the judgment on behalf of himself and five judges, justices Sanjay Kishan Kaul, B R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, said “insufficiency of stamping” does not make an agreement invalid or unenforceable but makes it inadmissible in evidence.

The CJI said the agreements which are not stamped or inadequately stamped are not void ab initio (invalid from beginning) or unenforceable, they are inadmissible in evidence. The CJI said objection in connection with the stamping of the agreement falls within the ambit of the arbitral tribunal. Justice Sanjiv Khanna authored a separate and concurring judgment.

The detailed judgment in the matter will be uploaded later in the day.

The apex court had heard submissions of various senior advocates, including Darius Khambata and Shyam Divan, before reserving its judgment. In September, the apex court had referred to a seven-judge bench the issue of reconsidering the correctness of a verdict delivered by a five-judge bench which had said that unstamped arbitration agreements are not enforceable in law.

The apex court was then considering a curative petition in which the matter regarding the need for reconsideration of the five-judge bench judgment delivered on April 25 was raised. The apex court, in its verdict delivered in April, had said, “An unstamped instrument, when it is required to be stamped, being not a contract and not enforceable in law, cannot, therefore, exist in law”.

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