Many commercial agreements in India are not stamped, or are stamped insufficiently. For years, this raised a difficult question: can a court appoint an arbitrator under an arbitration clause contained in an unstamped agreement?
In December 2023, a seven-judge bench of the Supreme Court, in In re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, held that agreements which are not stamped or are inadequately stamped are inadmissible in evidence under the Stamp Act, but are not void or unenforceable. Non-stamping is a curable defect.
The Court further held that at the stage of appointing an arbitrator under Section 11, the court should examine only whether an arbitration agreement prima facie exists. Objections about stamping are for the arbitral tribunal to decide.
This is a significant pro-arbitration ruling. A party can no longer derail the appointment of an arbitrator simply by pointing out that the underlying contract was not stamped. The stamp duty issue still has to be dealt with — the document must be properly stamped and any penalty paid before it can be admitted in evidence — but it does not block arbitration from starting.
The practical lesson: stamp important agreements correctly at execution. It avoids penalties and argument later, even though the arbitration clause itself will not fail for lack of stamping.
This note summarises the reported judgment for general information and is not legal advice on any specific matter.