This Wednesday, a constitutional bench of seven judges overturned the decision in M/s. N.N. Global Mercantile Pvt. Ltd. v. M/s. Indo Unique Flame Ltd. And Ors. In the earlier 3:2 majority ruling, it was established that arbitration agreements lacking proper stamping were not enforceable. The recent decision asserts that arbitration clauses in agreements with insufficient stamping can indeed be enforced.
The constitutional bench, consisting of Chief Justice of India DY Chandrachud, Justice Sanjay Kishan Kaul, Justice Sanjiv Khanna, Justice B R Gavai, Justice Surya Kant, Justice JB Pardiwala, and Justice Manoj Misra, delivered the verdict in the matter titled “In Re Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899.”
In the year 2020, the Supreme Court noted that an arbitration clause within an agreement, mandated to be appropriately stamped, cannot be recognized by the court if it lacks sufficient stamping. Subsequently, in April, a Constitution Bench of the Supreme Court, with a 3:2 majority, ruled that an arbitration agreement within an unstamped contract is not enforceable.
On September 26, a bench of five judges referred the matter to an expanded bench to reevaluate the validity of NN Global. The decision to reconsider arose due to the “unbounded uncertainty in the realm of arbitration.” The bench acknowledged the need to review its earlier April ruling, which stated that an arbitration clause lacks legal enforceability if the corresponding agreement is either unstamped or inadequately stamped.
