Team Blitz India
NEW DELHI: The Supreme Court unanimously ruled on December 13 that unstamped arbitration agreements were legally enforceable. The seven-judge Constitution Bench said that deeming such agreements unenforceable merely due to a lack of stamping at the start of arbitral proceedings goes against the rationale of the law.
The court said that agreements without the right stamping were not automatically void or unenforceable – they just couldn’t be used as evidence. It also said this was a fixable problem. Stamping refers to paying stamp duty on the value of an agreement as required by law.
The issue dates back to 2011, when the Supreme Court held that unstamped arbitration agreements could not be enforced. In 2020 the matter was brought to the Supreme Court again by NN Global Mercantile Pvt. Ltd., which had a dispute with Indo Unique Flame Ltd over a bank guarantee. NN Global claimed the agreement was unstamped and thus unenforceable. In January 2021, a three-judge bench disagreed with previous rulings and referred the case to a five-judge Constitution Bench.
