Enforceability Of Unstamped Arbitration Agreements

In a recent ruling in the case of N.N. Global Mercantile Private Limited vs. Indo Unique Flame Limited and Others ¹, a constitution bench of the Supreme Court of India decided by a majority of 3:2 that an unstamped instrument containing an arbitration clause cannot be considered a legally enforceable contract under Section 2(h) of the Indian Contract Act 1872. Consequently, such an instrument, subject to stamp duty, does not hold enforceability as per Section 2(g) of the Indian Contract Act.

The court further held that the provisions of Sections 33 and the bar under Section 35 of the Indian Stamp Act 1899, which apply to instruments chargeable to stamp duty, render the arbitration agreement in an unstamped instrument legally non-existent unless the instrument is validated under the Stamp Act.