Arbitration Clause In An Unstamped Contract Is Valid

INTRODUCTION:

Nearly after a decade of deciding that an arbitration clause contained in an unstamped or deficiently stamped contract, is not valid and hence not enforceable until such deficiency is removed, in the case of SMS Tea Estates Vs. M/s Chandmari Tea Co. Pvt. Ltd.¹, the Hon'ble Supreme Court overruled the said judgment in case of SMS Tea Estates (supra) and held that arbitration clause contained in an unstamped or deficiently stamped instrument, being an independent contract, is valid and enforceable. This has been held by a three judges' bench of the Hon'ble Supreme Court in the matter of M/s N.N. Global Mercantile Pvt. Ltd. Vs. M/s Indo Unique Frame Ltd. & Ors². After holding as above, the Apex Court also referred the findings of a coordinate bench in the judgment of Vidya Drolia & Ors. v. Durga Trading Corporation³ to a constitution bench of five judges, for authoritative decision on the following question: