Arbitration: Supreme Court On Enforceability Of Arbitration Clause Present In An Unstamped Agreement

The Supreme Court of India ("SC") in the recent judgment of M/s. N.N. Global Mercantile Pvt. Ltd. v M/S. Indo Unique Flame Ltd. & Ors.¹ ruled that non-payment of stamp duty on a commercial agreement, does not consequently invalidate the arbitration agreement embedded in the said commercial agreement.

In the appeal filed by the M/s. N.N. Global Mercantile Pvt. Ltd. ("Appellant") against M/s. Indo Unique Flame Ltd. ("Respondent No.1") and others, the issue arose as to whether an arbitration agreement would be non-existent in law, invalid or un-enforceable, if the underlying contract was not stamped as per the relevant Stamp Act.

The SC in overruling its former precedent laid down in the case of SMS Tea Estates Pvt. Ltd. v. M/s. Chandmari Tea Co. Pvt. Ltd.² held that it is well settled in arbitration jurisprudence that an arbitration agreement is independent from the substantive commercial contract in which it is embedded and non-stamping of the commercial