N.N. Global Mercantile Private Limited vs Indo Unique Flame Limited & Ors. - A Step Forward And Then Backward!

On April 25, 2023, a constitution bench of the Supreme Court of India ("Constitution Bench"), delivered a split verdict, holding by a 3:2 majority that an arbitration agreement as well as an instrument containing an arbitration agreement, which attracts stamp duty and which is unstamped or is insufficiently stamped, cannot be acted upon, as such a document cannot be said to be a contract enforceable in law within the meaning of Section 2 (h) read with Section 2 (g) of the Indian Contract Act, 1872 ("Contract Act"). This decision revives the earlier decision of the Supreme Court in SMS Tea Estates (P) Ltd vs Chandmari Tea Co. (P) Limited ("SMS Tea")¹.

A 3-judge bench of the Supreme Court in N.N. Global Mercantile Private Limited vs Indo Unique Flame Limited & Ors.², had held that in view of the doctrine of separability, the arbitration agreement being a separate and distinct agreement from the underlying contract would survive independent of the substantive