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Stamp Acts and Rules

Stamp Act, 1899
— Ss. 33 and 35 — Unstamped/Improperly stamped agreement — Held,
does not amount to a void agreement — Inadmissible and void agreement
— Distinguished between — Held, non-stamping or improper stamping does not
result in the instrument becoming invalid and the Stamp Act does not render such
an instrument void — Further, non-payment of stamp duty is accurately
characterised as a curable defect and the Stamp Act itself provides for the manner
in which the defect may be cured and sets out a detailed procedure for it — On the
other hand, there is no procedure by which a void agreement can be “cured” —
Further, S. 2(j) of the Contract Act, which provides that a contract which ceases to
be enforceable by law becomes void when it ceases to be enforceable, is not
attracted when an instrument is rendered inadmissible under S. 35 of the Stamp
Act — Words and Phrases — “Inadmissible”, “void” — Distinguished — Contract and
Specific Relief — Particular Statutes — Contract Act, 1872 — S. 2(j) — Arbitration
— Arbitration and Conciliation Act, 1996 — Ss. 7, 8, 11 and 16
(Paras 54 and 58)
In N.N. Global Mercantile, (2021) 4 SCC 379 [“N.N. Global (1)"] a Bench of three Judges of
the Supreme Court was called upon in a special leave petition to determine the enforceability
of an arbitration agreement contained in an unstamped work order. The Bench, speaking
through Indu Malhotra, J. held that an arbitration agreement, being separate and distinct
from the underlying commercial contract, would not be rendered invalid, unenforceable, or
non-existent. The Court held that the non-payment of stamp duty would not invalidate even
the underlying contract because it is a curable defect. In the process, the Supreme Court
adopted a view at variance with SMS Tea Estates, (2011) 14 SCC 66 and Garware Wall
Ropes, (2019) 9 SCC 209.
N.N. Global (1) case noted the decision of the Coordinate Bench in Vidya Drolia, (2021) 2 SCC
1 and doubted the correctness of the view adopted in Garware Wall Ropes case and Vidya
Drolia case. Tt referred the following issue to a Bench of five Judges:
“Whether the statutory bar contained in Section 35 of the Stamp Act, 1899 applicable to
instruments chargeable to stamp duty under Section 3 read with the Schedule to the Act,
would also render the arbitration agreement contained in such an instrument, which is not
chargeable to payment of stamp duty, as being non-existent, unenforceable, or invalid,
pending payment of stamp duty on the substantive contract/instrument?”
The Constitution Bench in N.N. Global Mercantile case [“N.N. Global (2)"] answered the
reference. By a majority of 3 : 2, it was held that N.N. Global (1) case does not represent
the correct position of law. The majority judgment (authored by K.M. Joseph, J. for himself
and Aniruddha Bose, J. with a concurring judgment by C.T. Ravikumar, J.) upheld the view
taken by the Supreme Court in SMS Tea Estates case and Garware Wall Ropes case. Ajay
Rastogi and Hrishikesh Roy, J). delivered separate dissenting judgments. The conclusions of
the majority can be summarised in the following terms:
(i) An unstamped instrument containing an arbitration agreement is void under Section 2(g)
of the Contract Act:
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(ii) An unstamped instrument, not being a contract and not enforceable in law, cannot exist
in law. The arbitration agreement in such an instrument can be acted upon only after it is
duly stamped;
(i) The “existence” of an arbitration agreement contemplated under Section 11(6-A) of the
Arbitration Act is not merely a facial existence or existence in fact, but also “existence in
law”;
(iv) The Court acting under Section 11 of the Arbitration Act cannot disregard the mandate
of Sections 33 and 35 of the Stamp Act requiring it to examine and impound an unstamped or
insufficiently stamped instrument; and
(v) The certified copy of an arbitration agreement must clearly indicate the stamp duty paid.
On 14-8-2023, the Bench in Seka Dobric, Arbitration Petition No. 25 of 2023 observed that
one of the objections in that matter pertained to non-stamping of the arbitration agreement.
Therefore, the arbitration petition was directed to be listed along with the curative petition in
Bhaskar Raju & Bros., (2020) 4 SCC 612.
On 26-9-2023, a Bench of five Judges took up the arbitration petition along with the curative
petition. Considering the larger ramifications and consequences of the decision in N.N. Global
(2) case, the Court referred the proceedings to a seven-Judge Bench. The relevant portion
of the order is extracted below:
“2. Having regard to the larger ramifications and consequences of the view of the majority in
N.N. Global Mercantile case, we are of the considered view that the proceedings should be
placed before a seven-Judge Bench to reconsider the correctness of the view of the five-
Judge Bench.”
The issues involved in this matter were:
(1) Whether the reference proceedings placed before a seven-Judge Bench maintainable?
(2) Whether the ruling in N.N. Global Mercantile case, sustainable i.e. whether the arbitration
agreement in an instrument can be acted upon only after it is duly stamped?
Answering the reference in the terms below,
Held:
Per curiam
Maintainability
The maintenance of judicial discipline is important for ensuring consistency and certainty in
the development of law. The rule of judicial discipline demands that a Bench of lower strength
is bound by the decision of a larger Bench. Judicial discipline also dictates that generally, a
Bench of the same strength can question the correctness of a decision rendered by a
Coordinate Bench. In such a situation, the matter is placed before a Bench of larger strength.
(Para 25)
However, there have been situations where a Bench of lower strength has differed with the
decision rendered by a Bench of larger strength. (Para 26)
Bharat Petroleum Corpn. Ltd. v. Mumbai Shramik Sangha, (2001) 4 SCC 448; Pradip Chandra
Parija v. Pramod Chandra Patnaik, (2002) 1 SCC 1, affirmed
Union of India v. Hansoli Devi, (2001) 4 SCC 404; Jose Antonio Cruz Dos R. Rodriguese v.
Collector (LA), (1996) 6 SCC 746, referred to
The respondent has relied on the Constitution Bench decision in Shilpa Sailesh, (2023) 14 SCC
231, to submit that there is no live cause or matter to justify the invocation of Court's
jurisdiction. The issue before the three-Judge Bench in Seka Dobric case pertains to the
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appointment of an arbitrator at Section 11 stage when the underlying contract is unstamped

or insufficiently stamped. The Bench directed the Section 11 application to be listed along
with the curative petition in view of the wider legal ramifications flowing from N.N. Global (2)
case. Therefore, the respondent's argument is misplaced because Seka Dobric case, which is
a live cause or matter, is also listed along with the curative petition. (Para 27)
Seka Dobric v. SA Eonsoftech (P) Ltd., Arbitration Petition No. 25 of 2023, considered
Shilpa Sailesh v. Varun Sreenivasan, (2023) 14 SCC 231, distinguished
The respondent has also argued that it was improper for the Constitution Bench to exercise
its curative jurisdiction to refer the matter to this Bench of seven Judges. Order VI Rule 2 of
the Supreme Court Rules, 2013 provide that if a Bench in the course of hearing any cause,
appeal or “other proceedings” considers that the matter be dealt with by a larger Bench, it
shall refer the matter to the Chief Justice, who shall thereupon constitute such a Bench for
the hearing of the matter. (Para 28)
The term “other proceeding” used in Order VI Rule 2 of the Supreme Court Rules, 2013 is a
comprehensive term giving widest freedom to a court of law to do justice to the parties in
the case. (Para 29)
The term “other proceeding” under Order VI Rule 2 of the Supreme Court Rules, 2013 will also
include curative petitions. (Para 29)
Kantaru Rajeevaru (Right to Religion, In re-9 J.) (2) v. Indian Young Lawyers Assn., (2020) 9
SCC 121, followed
Moreover, the reference raises important issues on points of law, which require immediate
consideration. (Paras 30 and 31)
Central Board of Dawoodi Bohra Community v. State of Maharashtra, (2005) 2 SCC 673 :
2005 SCC (Cri) 546 : 2005 SCC (L&S) 246; Ganga Sugar Corpn. Ltd. v. State of U.P., (1980)
1 SCC 223, affirmed
Union of India v. Raghubir Singh, (1989) 2 SCC 754; Union of India v. Hansoli Devi, (2002) 7
SCC 273, considered
The Stamp Act, 1899
In terms of Section 42 of the Stamp Act, an instrument is admissible in evidence once the
payment of duty and a penalty (if any) is complete. It stipulates that either the person
admitting the instrument in evidence or the Collector, as the case may be, shall certify by
endorsement that the proper duty has been paid. (Para 47)
The procedure contemplated by the Stamp Act facilitates the collection of revenue. It
permits instruments to be impounded not only by persons in charge of a public office or those
who are empowered by law to receive evidence but also by any person who is empowered to
receive evidence by consent of parties. The statute then sets out the procedure to be
followed upon impounding a document. This procedure ensures that stamp duty is paid. After
the payment of the appropriate amount under the appropriate description in Schedule I and
the penalty (if any), the Stamp Act provides for the certification of such payment by an
endorsement by the appropriate authority. Once an instrument has been endorsed, it may be
admitted into evidence, registered, acted upon or authenticated as if it had been duly
stamped. (Para 48)
The difference between inadmissibility and voidness
The admissibility of an instrument in evidence is distinct from its validity or enforceability in
law. Section 2(g) of the Contract Act provides that an agreement not enforceable by law is
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said to be void. The admissibility of a particular document or oral testimony, on the other
hand, refers to whether or not it can be introduced into evidence. (Para 49)
P. Ramanatha Alyar, The Law Lexicon (2nd Edn., 1997), referred to
An agreement can be void without its nature as a void agreement having an impact on
whether it may be introduced in evidence. Similarly, an agreement can be valid but
inadmissible in evidence. For instance, A and B may enter into an agreement by which B is
restrained from undertaking a particular trade. This agreement would be void under Section
27 of the Contract Act but this does not impact its admissibility in evidence should A attempt
to enforce it against B. The Court will not enforce the agreement between the parties
because it is void but the agreement is nonetheless admissible in evidence. (Para 51)
When an agreement is void, we are speaking of its enforceability in a court of law. When it is
inadmissible, we are referring to whether the Court may consider or rely upon it while
adjudicating the case. This is the essence of the difference between voidness and
admissibility. (Para 52)
Section 35 of the Stamp Act renders a document inadmissible and not void
The majority judgment in N.N. Global (2) case summed up its holding in the following terms:
“109. ... An agreement which is unstamped or insufficiently stamped is not enforceable, as
long as it remains in the said condition. Such an instrument would be void as being not
enforceable [see Section 2(g) of the Contract Act].”
The above observation conflates the distinction between enforceability and admissibility.
(Para 53)
Section 35 of the Stamp Act is unambiguous. It stipulates, “No instrument chargeable with
duty shall be admitted in evidence .. " The term “admitted in evidence” refers to the
admissibility of the instrument. Sub-section (2) of Section 42, too, states that an instrument
in respect of which stamp duty is paid and which is endorsed as such will be “admissible in
evidence”. The effect of not paying duty or paying an inadequate amount renders an
instrument inadmissible and not void. Non-stamping or improper stamping does not result in
the instrument becoming invalid. The Stamp Act does not render such an instrument void.
The non-payment of stamp duty is accurately characterised as a curable defect. The Stamp
Act itself provides for the manner in which the defect may be cured and sets out a detailed
procedure for it. It bears mentioning that there is no procedure by which a void agreement
can be “cured”. (Para 54)
Thiruvengadam Pillai v. Navaneethammal, (2008) 4 SCC 530, affirmed
There is a clear distinction to be drawn between invalidity and inadmissibility of documents.
Certain statutes and sections render documents invalid if they are not stamped. No section
of the Stamp Act has this effect. (Para 56)
Gulzari Lal Marwari v. Ram Gopal, 1936 SCC OnLine Cal 275; Boottam Pitchiah v. Boyapati
Koteswara Rao, 1964 SCC OnLine AP 5, approved
Section 2(j) of the Contract Act provides as follows:
“2. (J) A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.”
Section 2()) is not attracted when an instrument is rendered inadmissible under Section 35 of
the Stamp Act. The effect of the latter is not to render an unstamped agreement
unenforceable. If it was unenforceable, it would imply that it was void. Indeed, the approach
of the majority in N.N. Global (2) case to the Contract Act would render unstamped
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agreements void ab initio and not void. (Paras 58 and 59)

N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 : (2023) 3 SCC
(Civ) 564, overruled
A plain reading of Section 11(6-A) makes it evident that it is referring to an arbitration
agreement. Section 11(6-A) provides that courts must confine themselves to an examination
of the existence of the arbitration agreement. The word “confine” indicates the intention of
the legislature to limit the jurisdiction of the courts at the stage of the appointment of an
arbitrator. (Para 62)
Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549, partly
affirmed and clarified
The purpose of the Stamp Act
The provisions of the Stamp Act clearly provide that an instrument could be admitted into
evidence as well as acted upon once the appropriate duty has been paid and the instrument
is endorsed. (Para 65)
The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain
classes of instruments : It is not enacted to arm a litigant with a weapon of technicality to
meet the case of his opponent. The stringent provisions of the Act are conceived in the
interest of the revenue once that object is secured according to law, the party staking his
claim on the instrument will not be defeated on the ground of the initial defect in the
instrument. (Para 66)
The Stamp Act is a legislation which is enacted in the interest of the revenue. The statute
must be interpreted with due regard to its purpose. (Para 66)
Hindustan Steel Ltd. v. Dilip Construction Co., (1969) 1 SCC 597, affirmed
The Arbitration and Conciliation Act, 1996
Arbitration is a method of alternative dispute resolution where parties agree to refer their
disputes to a neutral third party known as an arbitrator. The aim of arbitration is to provide
speedy, efficient and binding resolution of disputes that have arisen between the parties in
regard to their substantive obligations. (Para 67)
Redfern and Hunter : International Arbitration (7th Edn., Oxford University Press, 2023) 3,
388, referred to
General Assembly of the United Nations : Model Law on International Commercial Arbitration
of the United Nations Commission on International Trade Law, 40/72 112th Plenary Session,
11-12-1985, referred to
The principle of arbitral autonomy is an integral element of the ever-evolving domain of
arbitration law. Arbitral autonomy means that the parties to an arbitration agreement can
exercise their contractual freedom to bestow the Arbitral Tribunal with the authority to
decide disputes that may arise between them. The basis of arbitral autonomy is to give
effect to the true intention of parties to distance themselves from the “risk of domestic
Judicial parochialism.” (Para 73)
Henry Horwitz & James Oldham : John Locke, John Mansfield, and Arbitration during the
Eighteenth Century, (1993) 36(1) The Historical Journal 137, 139; Earl Wolaver : The
Historical Background of Commercial Arbitration, (1934) 83 University of Pennsylvania Law
Review 132, 142; Julian D.M. Lew : Achieving the Dream : Autonomous Arbitration, (2006) 22
(2) Arbitration International 179, pp. 183, 185, referred to
Although Arbitral Tribunals have autonomy in the procedural and substantive sense, they are
not comnletelv indenendent of the law of the countrv in which the Arbitral Tribunal has its
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juridical seat. (Para 75)

Principle of minimum judicial interference
The principle of judicial non-interference in arbitral proceedings is fundamental to both
domestic as well as international commercial arbitration. The principle entails that the arbitral
proceedings are carried out pursuant to the agreement of the parties or under the direction
of the Tribunal without unnecessary interference by the national courts. This principle serves
to proscribe judicial interference in arbitral proceedings, which would undermine the objective
of the parties in agreeing to arbitrate their disputes, their desire for less formal and more
flexible procedures, and their desire for neutral and expert arbitral procedures. The principle
of judicial non-interference in arbitral proceedings respects the autonomy of the parties to
determine the arbitral procedures. This principle has also been incorporated in international
instruments, including the New York Convention and the Model Law. (Para 76)
Rio Algom v. Sammi Steel Co., Ontario Court of Justice, Canada, 1-3-1991, 1991 OJ No. 268,
followed
Gary Born:"The Principle of Judicial Non-Interference in International Arbitration Proceedings”,
(2009) 30 University of Pennsylvania Journal of International Law 999, 1002; Gary Born :
International Arbitration Law and Practice (3rd Edn., 2021) 2361; Article II(3), New York
Convention; Report of the Working Group on International Contract Practices on the work of
its seventh session, A/CN.9/246 (New York, 23-1-1984 to 3-2-1984) 45; Manuel A
Gomez:“Article 5 : Extent of Court Intervention” in Ilias Bantekas (Eds.), Uncitral Model Law
on International Commercial Arbitration : A Commentary (2020) 89; Digest of Case Law on
the Model Law on International Commercial Arbitration (2012) 21; Richard Garnett:“Article 5
of the Model Law : Protector of the Arbitral Process?”, (2021) 38(2) Journal of International
Arbitration 127-146, referred to
One of the main objectives of the Arbitration Act is to minimise the supervisory role of Courts
in the arbitral process. Party autonomy and settlement of disputes by an Arbitral Tribunal are
the hallmarks of arbitration law. Section 5 gives effect to the true intention of the parties to
have their disputes resolved through arbitration in a quick, efficient and effective manner by
minimising judicial interference in the arbitral proceedings. Parliament enacted Section 5 to
minimise the supervisory role of Courts in the arbitral process to the bare minimum, and only
to the extent “so provided” under Part I of the Arbitration Act. In doing so, the legislature did
not altogether exclude the role of Courts or judicial authorities in arbitral proceedings, but
limited it to circumstances where the support of judicial authorities is required for the
successful implementation and enforcement of the arbitral process. The Arbitration Act
envisages the role of Courts to “support arbitration process” by providing necessary aid and
assistance when required by law in certain situations. (Para 81)
Food Corpn. of India v. Indian Council of Arbitration, (2003) 6 SCC 564; Union of India v.
Popular Construction Co., (2001) 8 SCC 470; P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4
SCC 539; Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee, (2014) 6
SCC 677 : (2014) 3 SCC (Civ) 642, affirmed
Section 5 begins with the expression “notwithstanding anything contained in any other law
for the time being in force.” The non obstante clause is Parliament's addition to Article 5 of
the Model Law. It is of a wide amplitude and sets forth the legislative intent of limiting judicial
intervention during the arbitral process. In the context of Section 5, this means that the
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provisions contained in Part 1 of the Arbitration Act ought to be given full effect and
operation irrespective of any other law for the time being in force. It is now an established
proposition of law that the legislature uses non obstante clauses to remove all obstructions
which might arise out of the provisions of any other law, which stand in the way of the
operation of the legislation which incorporates the non obstante clause. (Para 82)
State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh, (2005) 9 SCC 129 : 2005 SCC (L&S)
460; Owners & Parties Interested in the Vessel M.V. Polaris Galaxy v. Banque Cantonale De
Geneve, (2024) 5 SCC 750; Chandavarkar Sita Ratna Rao v. Ashalata S. Guram, (1986) 4
SCC 447, affirmed
The scope of the non obstante clause is limited to prohibiting the intervention of judicial
authorities, unless it has been expressly provided for under Part I of the Arbitration Act.
(Para 85)
Icici Bank Ltd. v. Sidco Leathers Ltd., (2006) 10 SCC 452; Morgan Securities & Credit (P)
Ltd. v. Modi Rubber Ltd., (2006) 12 SCC 642; JIK Industries Ltd. v. Amarlal V. Jumani, (2012)
3 SCC 255 : (2012) 2 SCC (Civ) 82 : (2012) 2 SCC (Cri) 125, affirmed
Section 5 has two facets — positive and negative. The positive facet vests judicial
authorities with jurisdiction over arbitral proceedings in matters expressly allowed in or dealt
with under Part I of the Arbitration Act. The flip side to this approach is that judicial
authorities are prohibited from intervening in arbitral proceedings in situations where the
Arbitral Tribunal has been bestowed with exclusive jurisdiction. This is the negative facet of
Section 5. The non obstante clause limits the extent of judicial intervention in respect of
matters expressly provided under the Arbitration Act. (Para 87)
Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75 : (2022) 1
SCC (Civ) 374; Secur Industries Ltd. v. Godrej & Boyce Mfg. Co. Ltd., (2004) 3 SCC 447,
affirmed
Section 5 is of aid in interpreting the extent of judicial interference under Sections 8 and 11
of the Arbitration Act. Section 5 contains a general rule of judicial non-interference.
Therefore, every provision of the Arbitration Act ought to be construed in view of Section 5
to give true effect to the legislative intention of minimal judicial intervention. (Para 89)
The Arbitration Act is a self-contained code
A self-contained code is a complete legislation with regard to the purpose for which it is
enacted. Such a self-contained code provides for a complete machinery to deal with the
purpose sought to be achieved by that law and its dependence on other legislations is either
absent or minimal. (Para 90)
Girnar Traders (3) v. State of Maharashtra, (2011) 3 SCC 1 : (2011) 1 SCC (Civ) 578; Fuerst
Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178; P.S.
Sathappan v. Andhra Bank Ltd., (2004) 11 SCC 672, affirmed
S.N. Srikantia & Co. v. Union of India, 1965 SCC OnLine Bom 133, approved
The Arbitration Act is a self-contained code inter alia with respect to matters dealing with
appointment of arbitrators, commencement of arbitration, making of an award and challenges
to the arbitral award, as well as execution of such awards. When a self-contained code sets
out a procedure, the applicability of a general legal procedure would be impliedly excluded.
Being a self-contained and exhaustive code on arbitration law, the Arbitration Act carries the
imperative that what is permissible under the law ought to be performed only in the manner
indicated, and not otherwise. Accordingly, matters governed by the Arbitration Act such as
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the arbitration agreement, appointment of arbitrators and competence of the Arbitral Tribunal
to rule on its jurisdiction have to be assessed in the manner specified under the law. The
corollary is that it is not permissible to do what is not mentioned under the Arbitration Act.
Therefore, provisions of other statutes cannot interfere with the working of the Arbitration
Act, unless specified otherwise. (Para 92)
Pasl Wind Solutions (P) Ltd. v. GE Power Conversion (India) (P) Ltd., (2021) 7 SCC 1 : (2021)
3 SCC (Civ) 702; Kandla Export Corpn. v. OCI Corpn., (2018) 14 SCC 715 : (2018) 4 SCC
(Civ) 664; Subal Paul v. Malina Paul, (2003) 10 SCC 361, affirmed
Principles of modern arbitration
The Arbitration Act represents the principles of modern arbitration, which seeks to give effect
to the mutual intention of the parties to resolve their disputes by a neutral third-party
Arbitral Tribunal, whose decision is final and binding on all the parties. Arbitration law allows
the parties to design arbitral procedures, which ensures efficiency and expediency of the
arbitration process. One of the reasons that business and commercial entities prefer
arbitration is because it obviates cumbersome judicial processes, which can often prove
expensive, complex and interminable. Most legal jurisdictions have also recognised and
adopted legal approaches that favour arbitration at both the domestic and international level.
In the process, national courts have given effect to principles such as the separability
presumption and jurisdictional competence of the Arbitral Tribunal. Modern arbitration law
does not completely restrict the role of national courts in the arbitration process, but gives
priority to the Arbitral Tribunal to decide on disputes and issues pertaining to arbitration
agreements as well as the substantive rights of the parties. The Arbitration Act reflects
these aspects of modern arbitration law. It is the duty of the Supreme Court to interpret the
Arbitration Act in a manner which gives life to the principles of modern arbitration in India.
The law on the arbitration agreement
(i) Separability of the arbitration agreement
The concept of separability or severability of an arbitration agreement from the underlying
contract is a legal fiction which acknowledges the separate nature of an arbitration
agreement. The separate nature of the arbitration agreement from the underlying contract is
one of the cornerstones of arbitration law. (Para 98)
The rationale for the separability presumption lies in the contractual freedom of the parties to
an arbitration agreement to settle their disputes by proceedings before an Arbitral Tribunal to
the exclusion of courts. According to the common grain of business understanding and
expectation, the parties intend all their disputes over substantive rights and obligations under
the underlying contract to be resolved by the Arbitral Tribunal. Therefore, the separability
presumption ensures that an arbitration agreement survives a termination, repudiation or
frustration of a contract to give effect to the true intention of the parties and ensure
sanctity of the arbitral proceedings. (Para 100)
Tobler v. Justizkommission des Kantons Schwyz, DFT 59 | 177 (Swiss Fed Tribunal, 1933);
Heyman v. Darwins Ltd., 1942 AC 356 (HL); Harbour Assurance Co. (U.K.) Ltd. v. Kansa
General International Insurance Co. Ltd., 1993 QB 701 : (1993) 3 WLR 42 (CA); Fili Shipping
Co. Ltd. v. Premium Nafta Products Ltd., 2007 Bus LR 1719 (HL); Prima Paint Corpn. v. Flood
& Conklin Mfg. Co., 1967 SCC OnLine US SC 160; Buckeye Check Cashing Inc. v. Cardegna,
2006 SCC OnLine US SC 14; Rent-A-Center, West Inc. v. Jackson, 2010 SCC OnLine US SC
78; BNA v. BNB, 2019 SGHC 142 (Singapore), relied on
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Mulheim Pipecoatings GmbH v. Welspun Fintrade Ltd., 2013 SCC OnLine Bom 1048, approved
“Analytical Commentary on Draft Text of a Model Law on Intemational Commercial
Arbitration”, A/CN.9/264 (25-3-1985) 38; Digest of Case Law on the Model Law on
International Commercial Arbitration (2012) 21; Redfern and Hunter on International
Arbitration (7th Edn., Oxford University Press, 2023) 388; Stephen Schwebel, Luke Sobota,
and Ryan Manton : International Arbitration : Three Salient Problems (Cambridge University
Press, 2nd Edn., 2020) 4; Gary Born : International Arbitration Law and Practice (3rd Edn.,
2021) 2361; Chitty on Contracts, Hugh Beale (Ed.), (32nd Edn., Sweet and Maxwell, 2015)
paras 32-028, referred to
India
The judicial view that emerges from the Indian courts also seems to suggest that an
arbitration agreement is treated as distinct and separate from the underlying contract as a
general rule of substantive validity. (Para 114)
Gary Born : International Arbitration Law and Practice (3rd Edn., 2021) 2361, referred to
First, the separability presumption contained in Section 16 is applicable not only for the
purpose of determining the jurisdiction of the Arbitral Tribunal. It encapsulates the general
rule on the substantive independence of an arbitration agreement. Second, parties to an
arbitration agreement mutually intend to confer jurisdiction on the Arbitral Tribunal to
determine questions as to jurisdiction as well as substantive contractual disputes between
them. The separability presumption gives effect to this by ensuring the validity of an
arbitration agreement contained in an underlying contract, notwithstanding the invalidity,
illegality or termination of such contract. Third, when the parties append their signatures to a
contract containing an arbitration agreement, they are regarded in effect as independently
appending their signatures to the arbitration agreement. The reason is that the parties intend
to treat an arbitration agreement contained in an underlying contract as distinct from the
other terms of the contract; and Fourth, the validity of an arbitration agreement, in the face
of the invalidity of the underlying contract, allows the Arbitral Tribunal to assume jurisdiction
and decide on its own jurisdiction by determining the existence and validity of the arbitration
agreement. In the process, the separability presumption gives effect to the doctrine of
competence-competence. (Para 120)
Union of India v. Kishorilal Gupta & Bros., 1959 SCC OnLine SC 6; Damodar Valley Corpn. v.
K.K. Kar, (1974) 1 SCC 141, statutorily superseded
Firm Ashok Traders v. Gurumukh Das Saluja, (2004) 3 SCC 155; National Agricultural Coop.
Mktg. Federation India Ltd. v. Gains Trading Ltd., (2007) 5 SCC 692; P. Manohar Reddy &
Bros. v. Maharashtra Krishna Valley Development Corpn., (2009) 2 SCC 494 : (2009) 1 SCC
(Civ) 612; Magma Leasing & Finance Ltd. v. Potluri Madhavilata, (2009) 10 SCC 103 : (2009)
4 SCC (Civ) 57, affirmed
The Constitution Bench acknowledged the separability presumption, but refused to apply it in
the context of Sections 33 and 35 of the Stamp Act. The relevant observation of the Court
is as follows:
“157. .. The evolution of the principle that an arbitration agreement is a separate and
distinct agreement from the contract, would indicate that it would have no play in the
context of the duty of a court, within the meaning of Sections 33 and 35 of the Stamp Act,
to act in consonance therewith.” (Para 121)
The above position of law is contrary to the separability presumption which treats an
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arbitration agreement as separate from the underlying contract. (Para 122)

N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 : (2023) 3 SCC
(Civ) 564, overruled
The doctrine of competence-competence
It is a general rule of international arbitration law that an Arbitral Tribunal has the power to
determine its own jurisdiction. The ability of an Arbitral Tribunal to determine its own
jurisdiction is an important facet of arbitration jurisprudence because it gives effect to the
separability presumption. The separability presumption insulates the arbitration agreement
from the defects of the underlying contract, and thereby ensures the sustenance of the
Tribunal's jurisdiction over the substantive rights and obligations of the parties under the
underlying contract even after such a contract is put to an end. The doctrine of competence
-competence allows the Tribunal to decide on all substantive issues arising out of the
underlying contract, including the existence and validity of the arbitration agreement. (Para
124)
Interpretation of the Greco-Turkish Agreement of December 1st, 1926, In re, 1928 SCC
OnLine PCIJ 5, relied on
Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., 2007 Bus LR 1719 (HL); Dallah Real
Estate & Tourism Holding Co v. Ministry of Religious Affairs of the Government of Pakistan,
(2011) 1 AC 763 : (2010) 3 WLR 1472 : 2011 Bus LR 158 (SC); Prima Paint Corpn. v. Flood&
Conklin Mfg. Co., 1967 SCC OnLine US SC 160; Buckeye Check Cashing Inc. v. Cardegna,
2006 SCC OnLine US SC 14; Malini Ventura v. Knight Capital Pte. Ltd., 2015 SGHC 225
(Singapore), considered
Fouchard, Gaillard : Goldman on International Commercial Arbitration, Emmanuel Gaillard and
John Savage (Eds.), (1999) 396; Gary Born, International Arbitration Law and Practice (3rd
Edn., 2021) 2361, referred to
India
Section 16 empowers the Arbitral Tribunal to rule on its own jurisdiction, including ruling on
any objections with respect to the existence or validity of arbitration agreement.
Importantly, the parties have a right under Sections 16(2) and 16(3) to challenge the
jurisdiction of the Arbitral Tribunal on grounds such as the non-existence or invalidity of the
arbitration agreement. The Arbitral Tribunal is obligated to decide on the challenge to its
jurisdiction, and where it rejects the challenge, it can proceed with the arbitral proceedings
and make an arbitral award. It is the principle of procedural competence-competence which
recognises the power of an Arbitral Tribunal to hear and decide challenges to its jurisdiction.
Once the Arbitral Tribunal makes an arbitral award, Section 16(6) allows the aggrieved party
to make an application for setting aside the award under Section 34. Sections 16(5) and 16
(6) further show that Parliament has completely ousted the jurisdiction of courts to interfere
during the arbitral proceedings — courts can intervene only after the Tribunal has made an
award. Thus, Section 16 is intended to give full effect to the procedural and substantive
aspects of the doctrine of competence-competence. (Para 131)
Dhanrajamal Gobindram v. Shamji Kalidas & Co., 1961 SCC OnLine SC 28; Khardah Co. Ltd. v.
Raymon & Co. (India) (P) Ltd., 1962 SCC OnLine SC 28, considered
Under Section 34, the grounds for setting aside an arbitral award are specific. The provision
requires a party challenging an award to plead and prove the existence of one or more such
grounds. The scheme of the Arbitration Act shows that although an Arbitral Tribunal is given
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priority to determine all issues pertaining to its jurisdiction based on the principle of
competence-competence, the Tribunal's decision is subject to judicial review at the stage
when an award is challenged. Moreover, one of the grounds on which an arbitral award can
be set aside is that the arbitration agreement is not valid under law. This indicates that the
Arbitration Act does not contemplate the Court determining the validity of an arbitration
agreement at a pre-arbitral stage. (Para 133)
Iffco Ltd. v. Bhadra Products, (2018) 2 SCC 534 : (2018) 2 SCC (Civ) 208; Fiza Developers &
Inter-Trade (P) Ltd. v. Amci (I) (P) Ltd., (2009) 17 SCC 796 : (2011) 2 SCC (Civ) 637,
affirmed
The issue that comes up for consideration is whether an issue of stamping is a jurisdictional
issue. Jurisdiction is generally defined as the power of a court or tribunal to hear and
determine a cause, and to adjudicate or exercise any judicial power in relation to such cause.
Jurisdiction refers to the authority of a court or tribunal to decide matters that are litigated
before it or to take cognizance of matters presented before it in a formal way for its decision.
(Para 136)
Official Trustee v. Sachindra Nath Chatterjee, 1968 SCC OnLine SC 103; NTPC Ltd. v.
Siemens Atkeingesellschaft, (2007) 4 SCC 451, affirmed
Sukh Lal Sheikh v. Tara Chand Ta, 1905 SCC OnLine Cal 164, approved
The scope of an Arbitral Tribunal's authority is wide enough as to comprehend all preliminary
issues affecting its jurisdiction, including the issue of sufficiency of stamping. (Para 137)
Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455 :
(2020) 1 SCC (Civ) 570, affirmed
In case the issue of stamping is raised before an Arbitral Tribunal, Sections 33 and 35 of the
Stamp Act make it evident that a person having authority by “consent of parties” to receive
evidence is empowered to impound and examine an instrument. A person having authority “by
consent of parties” to receive evidence includes an Arbitral Tribunal which is constituted by
consent of parties. (Para 138)
Negative competence-competence
The international arbitration law as well as domestic law prioritise the Arbitral Tribunal by
permitting them to initially decide challenges to their authority instead of the Courts. The
policy consideration behind this approach is two-fold : first, to recognise the mutual intention
of the parties of choosing the arbitrator to resolve all their disputes about the substantive
rights and obligations arising out of contract; and second, to prevent parties from initiating
parallel proceedings before courts and delaying the arbitral process. This is the positive
aspect of the doctrine of competence-competence. (Para 139)
The negative aspect, in contrast, speaks to the national courts. It instructs the Courts to
limit their interference at the referral stage by deferring to the jurisdiction of the Arbitral
Tribunal in issues pertaining to the existence and validity of an arbitration agreement. Thus,
the negative aspect of the doctrine of competence-competence suggests that the Courts
should refrain from entertaining challenge to the jurisdiction of the Arbitral Tribunal before the
arbitrators themselves have had an opportunity to do so. Allowing Arbitral Tribunals to first
rule on their own jurisdiction and later allowing the Courts to determine if the Tribunal
exercised its powers properly safeguards both the power and authority of the Arbitral Tribunal
as well as the Courts. The negative aspect of the doctrine has been expressly recognised by
Indian courts. Considering both the positive and negative facets, the principle can be defined
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as a rule whereby arbitrators must have the first opportunity to hear challenges relating to
their jurisdiction, which is subject to subsequent review by courts. (Para 140)
Chloro Controls (India) (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641 :
(2013) 1 SCC (Civ) 689; ArcelorMittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd.,
(2022) 1 SCC 712, affirmed
Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549, partly
affirmed
Fouchard, Gaillard : Goldman on International Commercial Arbitration, Emmanuel Gaillard and
John Savage (Eds.), (1999) 396; George A. Bermann:“The “Gateway” Problem in International
Commercial Arbitration”, (2012) 37 Yale Journal of International Law 1, 16, referred to
Judicial interference under the Arbitration Act
When parties enter into an arbitration agreement, it is their mutual and unequivocal intention
to submit their disputes to an Arbitral Tribunal. The arbitration law recognises this aspect by
granting autonomy to the parties to adopt a procedural mechanism for the appointment of
arbitrators. Party autonomy has also been expressly recognised by international arbitration
covenants as well as national arbitration legislations. (Para 144)
A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386 : (2017) 1 SCC (Civ) 79, affirmed
With the coming into force of the 2015 Amendment Act, the nature of preliminary examination
at the referral stage under Section 11 was confined to the existence of an arbitration
agreement. It also incorporates a non obstante clause which covers “any judgment, decree
or order of any court”. By virtue of the non obstante clause, Section 11(6-A) has set out a
new position of law, which takes away the basis of the position laid down by the previous
decisions of the Supreme Court in Pate/ Engg., (2005) 8 SCC 618 and Boghara Polyfab, (2009)
1 SCC 267. It is also important to note that Parliament did not incorporate the expression “or
is null and void” as was suggested by the Law Commission. This indicates that Parliament
intended to confine the jurisdiction of the Courts at the pre-arbitral stage to as minimum a
level as possible. (Para 155)
The examination under Section 11(6-A) is “confined to the examination of the existence of an
arbitration agreement and is to be understood in the narrow sense”. (Para 158)
Vidya Drolia case proceeds on the presumption that Section 11(6-A) was effectively omitted
from the statute books by the 2019 Amendment Act. (Para 162)
Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549, partly
overruled
The 2015 Amendment Act has laid down different parameters for judicial review under Section
8 and Section 11. Where Section 8 requires the Referral Court to look into the prima facie
existence of a valid arbitration agreement, Section 11 confines the Court's jurisdiction to the
examination of the existence of an arbitration agreement. Although the object and purpose
behind both Sections 8 and 11 is to compel parties to abide by their contractual
understanding, the scope of power of the Referral Courts under the said provisions is
intended to be different. The same is also evident from the fact that Section 37 of the
Arbitration Act allows an appeal from the order of an Arbitral Tribunal refusing to refer the
parties to arbitration under Section 8, but not from Section 11. Thus, the 2015 Amendment
Act has legislatively overruled the dictum of Patel Engg. case where it was held that Section
8 and Section 11 are complementary in nature. Accordingly, the two provisions cannot be
read as laying down a similar standard. (Para 164)
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The scope of examination under Section 11(6-A) should be confined to the existence of an
arbitration agreement on the basis of Section 7. Similarly, the validity of an arbitration
agreement, in view of Section 7, should be restricted to the requirement of formal validity
such as the requirement that the agreement be in writing. This interpretation also gives true
effect to 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. (Para 165)
The burden of proving the existence of arbitration agreement generally lies on the party
seeking to rely on such agreement. In jurisdictions such as India, which accept the doctrine
of competence-competence, only prima facie proof of the existence of an arbitration
agreement must be adduced before the Referral Court. The Referral Court is not the
appropriate forum to conduct a mini-trial by allowing the parties to adduce the evidence in
regard to the existence or validity of an arbitration agreement. The determination of the
existence and validity of an arbitration agreement on the basis of evidence ought to be left
to the Arbitral Tribunal. (Para 166)
Section 11(6-A) uses the expression “examination of the existence of an arbitration
agreement”. The purport of using the word “examination” connotes that the legislature
intends that the Referral Court has to inspect or scrutinise the dealings between the parties
for the existence of an arbitration agreement. Moreover, the expression “examination” does
not connote or imply a laborious or contested inquiry. On the other hand, Section 16 provides
that the Arbitral Tribunal can “rule” on its jurisdiction, including the existence and validity of
an arbitration agreement. A “ruling” connotes adjudication of disputes after admitting
evidence from the parties. Therefore, it is evident that the Referral Court is only required to
examine the existence of arbitration agreements, whereas the Arbitral Tribunal ought to rule
on its jurisdiction, including the issues pertaining to the existence and validity of an
arbitration agreement. (Para 167)
SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618; National Insurance Co. Ltd. v. Boghara
Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117, statutorily superseded
Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549, clarified
Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764;
Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714 : (2019) 4 SCC (Civ)
441; Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234, affirmed
Law Commission of India, 246th Report (2014), referred to
Harmonious construction of the Arbitration Act, the Stamp Act, and the Contract Act
In the present reference, the challenge before the Supreme Court is to harmonise the
provisions of the Arbitration Act and the Stamp Act. The object of the Arbitration Act is to
inter alia ensure an efficacious process of arbitration and minimise the supervisory role of
Courts in the arbitral process. On the other hand, the object of the Stamp Act is to secure
revenue for state. It is a cardinal principle of interpretation of statutes that provisions
contained in two statutes must be, if possible, interpreted in a harmonious manner to give full
effect to both the statutes. In providing a harmonious interpretation, the Supreme Court has
to be cognizant of the fact that it does not defeat the purpose of the statutes or render
them ineffective. The challenge, therefore, before the Supreme Court is to preserve the
workability and efficacy of both the Arbitration Act and the Stamp Act. (Para 176)
CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57; Jagdish Singh v. State (NCT of Delhi),
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(1997) 4 SCC 435; State of T.N. v. M.K. Kandaswami, (1975) 4 SCC 745; Sultana Begum v.
Prem Chand Jain, (1997) 1 SCC 373; Kandla Export Corpn. v. OCI Corpn., (2018) 14 SCC
715 : (2018) 4 SCC (Civ) 664; Silpi Industries v. Kerala SRTC, (2021) 18 SCC 790, affirmed
The Arbitration Act will have primacy with respect to arbitration agreements
The Arbitration Act is a legislation enacted to inter alia consolidate the law relating to
arbitration in India. It will have primacy over the Stamp Act and the Contract Act in relation
to arbitration agreements for multiple reasons.
(a) The Arbitration Act is a special law and the Contract Act and the Stamp Act are
general laws
It is trite law that a general law must give way to a special law. This rule of construction
stems from the doctrine generalia specialibus non derogant. (Para 178)
LIC v. D.J. Bahadur, (1981) 1 SCC 315 : 1981 SCC (L&S) 111; Sundaram Finance Ltd. v. T.
Thankam, (2015) 14 SCC 444, affirmed
The Arbitration Act is a special law in the context of this case because it governs the law on
arbitration, including arbitration agreements — Section 2(1)(b) and Section 7 of this statute
define an arbitration agreement. In contrast, the Stamp Act defines “instruments” as a whole
and the Contract Act defines “agreements” and “contracts”. (Para 183)
It is not only the definition of “arbitration agreement” but also the other provisions of the
Arbitration Act and the purpose for which it was enacted that makes it a special law. The
Arbitration Act is a code in itself. It provides for a detailed mechanism by which arbitration
may be conducted, with a view to ensuring its success as a speedy and efficacious
alternative to the Courts. The Statements of Objects and Reasons of the Arbitration Act
records that the main objective of this law was to comprehensively cover international and
commercial arbitration and conciliation as also domestic arbitration and conciliation. (Para
184)
Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75 : (2022) 1
SCC (Civ) 374, affirmed
(b) Section 5 of the Arbitration Act
It restricts the extent of judicial intervention in various matters governed by Part I of the
Arbitration Act. The non obstante clause in this provision is of particular significance. It
indicates that the rule in Section 5 (and consequently, the provisions of the Arbitration Act)
must take precedence over any other law for the time being in force. Any intervention by the
Courts (including impounding an agreement in which an arbitration clause is contained) is,
therefore, permitted only if the Arbitration Act provides for such a step, which it does not.
Sections 33 and 35 cannot be allowed to operate in proceedings under Section 11 (or
Section 8, as the case may be), in view of the non obstante clause in Section 5. (Para 185)
Hameed Joharan v. Abdul Salam, (2001) 7 SCC 573; CDC Financial Services (Mauritius) Ltd.
v. BPL Communications Ltd., (2003) 12 SCC 140; Empire Jute Co. Ltd. v. Jute Corpn. of India
Ltd., (2007) 14 SCC 680; Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ)
204; Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75 : (2022)
1 SCC (Civ) 374, affirmed
N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 : (2023) 3 SCC
(Civ) 564, overruled
(c) Parliament was aware of the Stamp Act when it enacted the Arbitration Act
Parliament was aware of the Stamp Act when it enacted the Arbitration Act. Yet, the latter
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does not specify stamping as a precondition to the existence of a valid arbitration

agreement. Further, Section 11(6-A) of the Arbitration Act requires the Court to confine
itself to the examination of the existence of the arbitration agreement. This provision stands
in contrast to Section 33(2) of the Stamp Act which also uses the word “examine”. Section
33(2) requires the person before whom an instrument is produced, to examine whether it is
stamped with a stamp of the value and description required by the law when such instrument
was executed or first executed. Although Parliament was aware of the mandate of Section 33
(2), it did not require the Court acting under Section 11 to also undertake the examination
required by Section 33(2).
Harmonious construction of the three statutes under consideration
(a) The effect of the competence-competence doctrine
It is the Arbitral Tribunal and not the Court which may test whether the requirements of a
valid contract and a valid arbitration agreement are met. If the Tribunal finds that these
conditions are not met, it will decline to hear the dispute any further. If it finds that a valid
arbitration agreement exists, it may assess whether the underlying agreement is a valid
contract. (Para 194)
A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386 : (2017) 1 SCC (Civ) 79, affirmed
By enacting Section 16 of the Arbitration Act, Parliament has (in a manner of speaking)
permitted an agreement to arbitrate to be preliminarily enforced even if it is only an
agreement. After parties have been referred to arbitration under Section 8 of the Arbitration
Act or after the appointment of arbitrators under Section 11 of the Arbitration Act, the
Arbitral Tribunal will have jurisdiction to determine all questions and issues in dispute between
the parties. The legitimate concerns of the revenue in the realisation of stamp duty are not
defeated because the Arbitral Tribunal has the jurisdiction to act in pursuance of the
provisions of the Stamp Act. (Para 195)
Once the Arbitral Tribunal has been appointed, it will act in accordance with law and proceed
to impound the agreement under Section 33 of the Stamp Act if it sees fit to do so. It has
the authority to receive evidence by consent of the parties, in terms of Section 35. The
procedure under Section 35 may be followed thereafter. In this manner, the competence-
competence doctrine is given life and arbitration proceedings can continue to remain a faster
alternative to suits before the trial courts or other, similar actions. (Para 199)
(b) The effect of the word "shall” in Sections 33 and 35 of the Stamp Act
Sections 33 and 35 of the Stamp Act use the word “shall”. While this ordinarily indicates that
the provision is mandatory, it may be read as directory. (Para 200)
Sainik Motors v. State of Rajasthan, 1961 SCC Online SC 15; State of U.P. v. Babu Ram
Upadhya, 1960 SCC OnLine SC 5, affirmed
(c) The object of the Stamp Act is preserved
The interests of the Revenue are not jeopardised in any manner because the duty chargeable
must be paid before the agreement in question is rendered admissible and the lis between the
parties adjudicated. The question is at which stage the agreement would be impounded and
not whether it would be impounded at all. The Courts are not abdicating their duty but are
instead giving effect to:
() The principle of minimal judicial intervention in Section 5 of the Arbitration Act;
(if) The prima facie standard applicable to Sections 8 and 11 of the Arbitration Act; and
(i) The purpose of the Stamp Act which is to protect the interests of the Revenue and not
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arm litigants with a weapon of technicality by which they delay the adjudication of the lis.
(Para 206)
(d) The interpretation of the law must give effect to the purpose of the Arbitration Act
in addition to the Stamp Act
The purpose of the Arbitration Act is to ensure that a speedy and efficacious alternative
dispute resolution system is available to parties both commercial and otherwise. This purpose
is in danger of being undermined by the interpretation accorded to the Stamp Act in N.N.
Global (2) case. The impounding of an agreement which contains an arbitration clause at the
stage of the appointment of an arbitrator under Section 11 (or Section 8 as the case may
be) of the Arbitration Act will delay the commencement of arbitration. It is a well-known fact
that courts are burdened with innumerable cases on their docket. (Para 207)
On SMS Tea Estates case
SMS Tea Estates case allowed the Courts to impound the document under Section 33 of the
Stamp Act at the Section 11 stage. Thus, the Courts were mandated to intervene at the pre
-arbitral stage before the Arbitral Tribunal could assume jurisdiction. SMS Tea Estates case
was decided in 2011. At that time, Patel Engg. case and Boghara Polyfab case held the field,
which held that the Referral Courts had wide powers to decide a large number of preliminary
issues, including the existence and validity of arbitration agreements. (Para 211)
Section 11(6-A) also legislatively altered the basis of SMS Tea Estates case to the extent
that it dealt with judicial intervention at the Section 11 stage. (Para 214)
Emaar MGF Land Ltd. v. Aftab Singh, (2019) 12 SCC 751 : (2018) 5 SCC (Civ) 652, relied on
SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., 2010 SCC OnLine Gau 762,
statutorily superseded partly
On Garware Wall Ropes case
Non-stamping or insufficient stamping of an instrument does not render it invalid or non-
existent. Therefore, paras 22 and 29 of Garware Wall Ropes case, which held that an
arbitration agreement contained in an unstamped or insufficiently stamped contract would be
non-existent in law, does not set forth the correct position of law. (Para 224)
Intercontinental Hotels Group (India) (P) Ltd. v. Waterline Hotels (P) Ltd., (2022) 7 SCC
662 : (2022) 4 SCC (Civ) 209, affirmed
Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 :
(2019) 4 SCC (Civ) 324, partly overruled
The Appointment of arbitrators by the Chief Justice of India Scheme, 1996
The Referral Court at Section 11 stage should not examine or impound an unstamped or
insufficiently stamped instrument, but rather leave it for the determination by the Arbitral
Tribunal. When a party produces an arbitration agreement or its certified copy, the Referral
Court only has to examine whether an arbitration agreement exists in terms of Section 7 of
the Arbitration Act. The Referral Court under Section 11 is not required to examine whether a
certified copy of the agreement/instrument/contract discloses the fact of payment of stamp
duty on the original. (Para 229)
Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao, (1971) 1 SCC 545; Hariom Agrawal v.
Prakash Chand Malviya, (2007) 8 SCC 514, clarified and distinguished
Vidya Drolia case does not deal with the issue of stamping
Vidya Drolia case did not deal with the issue of the effect of an unstamped or insufficiently
stamped instrument on the existence or validity of an arbitration agreement. Therefore, the
reasonina in Vidva Drolia case does not lead to the conclusion that Garware Wall Robes case
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was rightly decided either on the aspect of examination and impounding of unstamped or
insufficiently stamped instrument with respect to arbitration proceedings, or the validity of on
arbitration agreement contained in an unstamped or insufficiently stamped underlying
contract. (Para 234)
Career Institute Educational Society v. Om Shree Thakurji Educational Society, (2023) 16
SCC 458 : 2023 SCC OnlLine SC 586, affirmed
Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549, clarified and
distinguished
Conclusions
(i) Agreements which are not stamped or are inadequately stamped are inadmissible in
evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void
ab initio or unenforceable;
(ii) Non-stamping or inadequate stamping is a curable defect;
(i) An objection as to stamping does not fall for determination under Sections 8 or 11 of the
Arbitration Act. The Court concerned must examine whether the arbitration agreement prima
facie exists;
(iv) Any objections in relation to the stamping of the agreement fall within the ambit of the
Arbitral Tribunal; and
(v) The decision in N.N. Global (2) case and SMS Tea Estates case are overruled. Paras 22
and 29 of Garware Wall Ropes case are overruled to that extent. (Para 235)
Bihar State Mineral Development Corpn. v. Encon Builders (I) (P) Ltd., (2003) 7 SCC 418,
affirmed
N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379 : (2021) 2 SCC
(Civ) 555; Bhaskar Raju & Bros. v. Dhamaratnakara Rai Bahadur Arcot Narainswamy Mudaliar
Chattram, 2014 SCC OnLine Kar 8629, impliedly affirmed
Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram v. Bhaskar Raju &
Bros., (2020) 4 SCC 612 : (2020) 3 SCC (Civ) 193; Bhaskar Raju & Bros. v. Dhamaratnakara
Rai Bahadur Arcot Narainswamy Mudaliar Chattram, 2021 SCC OnLine SC 3551, reversed
SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC
(Civ) 777; N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 : (2023)
3 SCC (Civ) 564, overruled
Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 :
(2019) 4 SCC (Civ) 324, partly overruled
Bhaskar Raju & Bros. v. Dhamaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram,
2023 SCC OnLine SC 1303, reference answered
Bhaskar Raju & Bros. v. Dhamaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram,
2023 SCC OnLine SC 1748; Seka Dobric v. SA Eonsoftech (P) Ltd., 2023 SCC OnLine SC 1745;
Bhaskar Raju & Bros. v. Dhamaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram,
2023 SCC OnLine SC 1746; Seka Dobric v. SA Eonsoftech (P) Ltd., 2023 SCC OnLine SC 1747,
referred to
United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC
607 : (2019) 2 SCC (Civ) 530; Rupa Ashok Hurra v. Ashok Hurra, (2002) 4 SCC 388, cited
Per Khanna, J. (concurring)
The negative stipulations in Sections 33 and 35 are specific, albeit not so absolute as to
make the instrument invalid in law. A “void ab initio” instrument, which is stillborn, has no
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corporeality in the eye of the law. It cannot confer or give rights, or create obligations.
However, an instrument which is “inadmissible” exists in law, albeit cannot be admitted in
evidence by such person, or be registered, authenticated or be acted upon by such person
or a public officer till it is duly stamped. As rightly observed by Chandrachud, C.J., Section 35
deals with admissibility, etc. of an instrument and not invalidity. (Para 247)
Section 36 of the Stamp Act refers to the situation where the admission of an instrument is
not to be questioned, and reads:
“36. Admission of instrument where not to be questioned.—Where an instrument has
been admitted in evidence, such admission shall not, except as provided in Section 61, be
called in question at any stage of the same suit or proceeding on the ground that the
instrument has not been duly stamped.”
Thus, where an instrument has been admitted in evidence, such admission shall not be called
in question, except as provided in Section 61, at any stage of the same suit or proceedings
on the ground that the instrument is not duly stamped. Consequently, where an instrument
has been admitted in evidence, such instrument cannot be impounded as it cannot be called
in question at any stage of the same suit or proceeding on the ground of insufficient
stamping. (Para 248)
An instrument which is void ab initio or void, cannot be validated by mere consent or waiver,
unless consent or waiver undoes the cause of invalidity. On the other hand, Section 36 of
the Stamp Act incorporates the doctrine of waiver, estoppel and implied consent. That apart,
after due stamping as per the Stamp Act, the unstamped or insufficiently stamped instrument
can be admitted in evidence, or be registered, authenticated or be acted upon by such
person or public officer. (Para 249)
Keshav Mills Co. Ltd. v. CIT, 1965 SCC OnLine SC 80, relied on
Javer Chand v. Pukhraj Surana, 1961 SCC OnLine SC 22; State of Bihar v. Karam Chand
Thapar & Bros. Ltd., 1961 SCC OnLine SC 130; Jupudi Kesava Rao v. Pulavarthi Venkata
Subbarao, (1971) 1 SCC 545; Hameed Joharan v. Abdul Salam, (2001) 7 SCC 573; Chiranji
Lal v. Hari Das, (2005) 10 SCC 746; Hariom Agrawal v. Prakash Chand Malviya, (2007) 8 SCC
514; Shyamal Kumar Roy v. Sushil Kumar Agarwal, (2006) 11 SCC 331; Avinash Kumar
Chauhan v. Vijay Krishna Mishra, (2009) 2 SCC 532 : (2009) 1 SCC (Civ) 649; Ram Rattan v.
Parma Nand, 1945 SCC OnLine PC 58; State of A.P. v. A.P. Jaiswal, (2001) 1 SCC 748 : 2001
SCC (L&S) 316; Total Environment Building Systems (P) Ltd. v. CCT, (2022) 16 SCC 219 :
2022 SCC OnLine SC 953; Union of India v. Raghubir Singh, (1989) 2 SCC 754, affirmed
An arbitration agreement is defined in the widest terms, and may be in the form of a clause in
the underlying contract or separate from an underlying agreement. Significantly, even when it
is a clause of the underlying agreement, it is treated as a separate agreement. (Para 263)
Caravel Shipping Services (P) Ltd. v. Premier Sea Foods Exim (P) Ltd., (2019) 11 SCC 461 :
(2019) 4 SCC (Civ) 720; Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia (P) Ltd.,
(2015) 13 SCC 477 : (2016) 1 SCC (Civ) 733, affirmed
Section 16 of the Arbitration Act, empowers the Arbitral Tribunal to rule on its own
jurisdiction. This includes the authority to decide the existence and validity of the arbitration
agreement. This has reference to Section 7 of the Arbitration Act. As per Section 16, an
arbitration agreement is an agreement independent of the other terms of the contract, even
when it is only a clause in the underlying contract. The section specifically states that a
decision by the Arbitral Tribunal holding the underlying contract to be null and void, will not
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lead to ipso jure the invalidity of the arbitration clause. The existence of an arbitration
agreement is to be ascertained with reference to the requirements of Section 7 of the
Arbitration Act. In a given case the underlying contract may be null and void, but the
arbitration clause may exist and be enforceable. Invalidity of an underlying agreement may
not, unless relating to its formation, result in invalidity of the arbitration clause in the
underlying agreement. (Para 264)
A defect in the arbitration agreement does not render it void ab initio unless the defect is so
fundamental or irretrievable as to negate the parties’ intent or agreement to arbitrate. (Para
265)
BNA v. BNB, 2019 SGHC 142 (Singapore); Insigma Technology Co. Ltd. v. Alstom Technology
Ltd., 2009 SGCA 24, followed
It is also important to draw a distinction between contracts which are void, and those which
are void ab initio due to lack of elements of offer or acceptance, which prevents a contract
from coming into operation. Thus, a contract by a minor or by a person of unsound mind
would be void due to lack of effectual offer or acceptance. But once the contract is made,
that is to say where parties, whatever their innermost state of mind, have to all outward
appearances, agreed with sufficient certainty in the same terms of the subject-matter, then
the contract is good unless and until it is set aside for failure of some condition on which the
existence of contract depends, or for fraud, or on some other equitable ground. Neither party
can rely upon its own mistake to say that it was a nullity from the beginning, no matter that
it was a mistake which to his mind was fundamental, no matter that the other party knew
that he was under a mistake. (Para 275)
Smith v. Hughes, (1871) LR 6 QB 597; Solle v. Butcher, (1950) 1 KB 671 (CA), relied on
BOI Finance Ltd. v. Custodian, (1997) 10 SCC 488; Canara Bank v. Standard Chartered Bank,
(2002) 10 SCC 697; Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee,
(2014) 6 SCC 677 : (2014) 3 SCC (Civ) 642; Avitel Post Studioz Ltd. v. HSBC PI Holdings
(Mauritius) Ltd., (2021) 4 SCC 713; ITC Ltd. v. George Joseph Fernandes, (1989) 2 SCC 1,
affirmed

M Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act,
1899, In re,
(2024) 6 SCC 1 : 2023 SCC OnLine SC 1666

-»
Bench Strength 7. Coram : Dr D.Y. Chandrachud’, C.J. and Sanjay Kishan Kaul*, Sanjiv

Khannaz, B.R. Gavai', Surya Kant‘, J.B. Pardiwala® and Manoj M/‘sra‘, .
[Date of decision : 13/12/2023]

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