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M/S N. N. GLOBAL MERCANTILE PRIVATE LIMITED vs. M/S INDO UNIQUE FLAME LTD. & ORS.

SCR Citation: [2023] 9 S.C.R. 285
Year/Volume: 2023/ Volume 9
Date of Judgment: 25 April 2023
Petitioner: M/S N. N. GLOBAL MERCANTILE PRIVATE LIMITED
Disposal Nature: Reference answered
Neutral Citation: 2023 INSC 423
Judgment Delivered by: Hon'ble Mr. Justice K.M. Joseph,Hon'ble Mr. Justice Ajay Rastogi,Hon'ble Mr. Justice Hrishikesh Roy ,Hon'ble Mr. Justice C.T. Ravikumar
Respondent: M/S INDO UNIQUE FLAME LTD. & ORS.
Case Type: CIVIL APPEAL /3802-3803/2020
Order/Judgment: Judgment
1. Headnote

.Arbitration and Conciliation Act, 1996 – ss. 11(6A), 7, 8, 9,11 and 16 – Indian Stamp Act, 1899 – ss. 3, 33 & 35 – Contract Act,1872 – ss. 2(h), 10 – Appointment of Arbitrators by The Chief Justice of India Scheme, 1996 – Arbitration Agreement in an unregistered instrument, which is not duly stamped, if valid and enforceable –Whether the statutory bar contained in s.35 of the Stamp Act, 1899 applicable to instruments chargeable to stamp duty under s.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 – Held [per K. M. Joseph, J. (for himself and for Aniruddha Bose, J.)] : An instrument, which is exigible to stamp duty, may contain an Arbitration Clause and which is not stamped,cannot be said to be a contract, which is enforceable in law within the meaning of s.2(h) of the Contract Act and is not enforceable under s.2(g) of the Contract Act – An unstamped instrument, when it is required to be stamped, being not a contract and not enforceable in law, cannot, therefore, exist in law – The true intention behind the insertion of s.11(6A) in the Act was to confine the Court, acting under s.11, to examine and ascertain about the existence of an Arbitration Agreement – The Scheme permits the Court, under s.11 of the Act, acting on the basis of the original agreement or on a certified copy –The certified copy must, however, clearly indicate the stamp duty paid – If it does not do so, the Court should not acton such a certified copy – If the original of the instrument is produced and it is unstamped, the Court, acting under s.11, is duty bound to act under s.33 of the Stamp Act – When it does so, the other provisions, which, in the case of the payment of the duty and penalty would culminate in the certificate under s.42(2) of the Stamp Act, would also apply – When such a stage arises, the Court will be free to process the Application as per law – An Arbitration Agreement, within the meaning of s.7 of the Act, which attracts stamp duty and which is not stamped or insufficiently stamped, cannot be acted upon, in view of s.35 of the Stamp Act, unless following impounding and payment of the requisite duty, necessary certificate is provided under s.42 of the Stamp Act – The provisions of s.33 and the bar under s.35 of the Stamp Act, applicable to instruments chargeable to stamp duty under s.3 read with the Schedule to the Stamp Act, would render the Arbitration Agreement contained in such instrument as being non-existent in law unless the instrument is validated under the Stamp Act – Held (per C. T. Ravikumar, J.)(concurring): Being unstamped or insufficiently stamped, the agreement would not be available to be ‘admitted in evidence’ and‘to be acted upon’, till it is validated following the procedures prescribed under the provisions of the Stamp Act and till then, it would not exist ‘in law’ – When the original document carrying the arbitration clause is produced and if it is found that it is unstamped or insufficiently stamped, the Court acting under s.11 is duty bound to act u/s.33 of the Indian Stamp Act – Held (per Ajay Rastogi, J.)(dissenting): The existence of a copy/certified copy of an arbitration agreement whether unstamped/insufficiently stamped at the pre-referral stage is an enforceable document for purposes of appointment of an Arbitrator under s.11(6A) of the Act, 1996 where the judicial intervention shall be minimal confined only to the prima facie examination of “existence of an arbitration agreement” alone keeping in view the object of 2015 amendment and the courts must strictly adhere to the time schedule for appointment of Arbitrator prescribed under s.11(13) of the Act, 1996 – All the preliminary /debatable issues including insufficiently stamped/unduly stampedor validity of the arbitration agreement etc. are referable to the Arbitrator/Arbitral Tribunal under s.16 of the Act, 1996 which, by virtue of the Doctrine of Kompetenz - Kompetenz has the power to do so – Held (per Hrishikesh Roy, J.) (dissenting): The examination of stamping and impounding need not be done at the threshold by a Court, at the pre-reference stage under s.11 of the Arbitration Act,1996 – Non-stamping/insufficient stamping of the substantive contract/instrument would not render the arbitration agreement non-existent in law and unenforceable/void, for the purpose of referring a matter for arbitration – An arbitration agreement should not be rendered void if it is suffering stamp deficiency which is a curable defect.

2. Case referred
3. Act
  • Arbitration and Conciliation Act, 1996 (26 of 1996)
  • Indian Stamp Act, 1899 (2 of 1899)
  • Indian Contract Act, 1872 (9 of 1872)
4. Keyword
  • Arbitration and Conciliation Act 1996
  • ss. 11(6A); 7; 8; 9; 11 and 16
  • Indian Stamp Act 1899
  • ss. 3; 33 & 35
  • Contract Act