IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS

CASE DETAILS

UNDER THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 (Curative Petition (C) No. 44 of 2023) In (Review Petition (C) No. 704 of 2021 ) In (Civil Appeal No. 1599 of 2020) HEADNOTES

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Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): Agreements which are not stamped or are inadequately stamped are inadmissible in evidence u/s.35 of the Stamp Act – Such agreements are not rendered void or void ab initio or unenforceable – Non-stamping or inadequate stamping is a curable defect – The Stamp Act itself provides for the manner in which the defect may be cured and sets out a detailed procedure for it – An objection as to stamping does not fall for determination u/ss.8 or 11 of the Arbitration Act – The concerned court must examine whether the arbitration agreement prima facie exists – Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal. [Paras 48 and 224] – Held (per Sanjiv Khanna, J.) (Concurring): Unstamped or insufficiently stamped instruments inadmissible in evidence in terms of s.35 of the Indian Stamp Act, 1899, are not rendered void and void ab initio – An objection as to the under-stamping or non-stamping of the underlying contract will not have any bearing when the prima facie test, “the existence of arbitration agreement”, is applied by the courts while deciding applications under Sections 8 or 11 of the Arbitration and Conciliation Act, 1996 – An objection as to insufficient stamping of the underlying agreement can be examined and decided by the arbitral tribunal. [Para 1] Evidence – Admissibility of documents – Difference between inadmissibility and voidness – Contract Act, 1872 – s.2(g). Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The admissibility of an instrument in evidence is distinct from its validity or enforceability in law – An agreement can be void without its nature as a void agreement having an impact on whether it may be introduced in evidence – Similarly, an agreement can be valid but inadmissible in evidence – When an agreement is void, one is speaking of its enforceability in a court of law – When it is inadmissible, one is referring to whether the court may consider or rely upon it while adjudicating the case – This is the essence of the difference between voidness and admissibility. [Paras 44, 45 and 46] Indian Stamp Act, 1899 – Purpose of. Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.):

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The Stamp Act is a fiscal legislation which is intended to raise revenue for the government – It is a mandatory statute. [Para 58] Arbitration – Principle of arbitral autonomy – Doctrines / Principles. Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The principle of arbitral autonomy is an integral element of the ever-evolving domain of arbitration law – Arbitral autonomy means that the parties to an arbitration agreement can exercise their contractual freedom to bestow the arbitral tribunal with the authority to decide disputes that may arise between them – The basis of arbitral autonomy is to give effect to the true intention of parties to distance themselves from the “risk of domestic judicial parochialism. [Para 66] Doctrines / Principles – Principle of judicial interference in arbitration proceedings – Scope of non-obstante clause contained in s.5 of the Arbitration and Conciliation Act 1996 – Legislative intention. Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The principle of judicial non-interference in arbitral proceedings serves to proscribe judicial interference in arbitral proceedings, which would undermine the objective of the parties in agreeing to arbitrate their disputes, their desire for less formal and more flexible procedures, and their desire for neutral and expert arbitral procedures – The principle of judicial non-interference in arbitral proceedings respects the autonomy of the parties to determine the arbitral procedures – This principle has also been incorporated in international instruments – s.5 of the Arbitration Act is of aid in interpreting the extent of judicial interference under ss.8 and 11 of the Arbitration Act – s.5 contains a general rule of judicial non-interference – Therefore, every provision of the Arbitration Act ought to be construed in view of s.5 to give true effect to the legislative intention of minimal judicial intervention. [Paras 69 and 82] Arbitration and Conciliation Act, 1996 – Is a self-contained code – Provisions of other statutes cannot interfere with the working of the

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Arbitration Act, unless specified otherwise. [Para 85 in judgment of Dr. D.Y. Chandrachud, CJI] Arbitration – Arbitration agreement – Is the foundation of arbitration as it records the consent of the parties to submit their disputes to arbitration. [Para 88 in judgment of Dr. D.Y. Chandrachud, CJI] Arbitration – Arbitration agreement – Separability of the arbitration agreement from the underlying contract in which it is contained. Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): An arbitration agreement is juridically independent from the underlying contract in which it is contained – The concept of separability reflects the presumptive intention of the parties to distinguish the underlying contract, which captures the substantive rights and obligations of the parties, from an arbitration agreement which provides a procedural framework to resolve the disputes arising out of the underlying contract – This presumption has various consequences in theory and practice, the most important being that an arbitration agreement survives the invalidity or termination of the underlying contract – The separability presumption gives effect to the doctrine of competence-competence. [Paras 90 and 112] Doctrines / Principles – Doctrine of competence-competence – Comparative analysis – Arbitration and Conciliation Act 1996 – s.16. Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The doctrine of kompetenz-kompetenz (also known as competence competence), as originally developed in Germany, was traditionally understood to imply that arbitrators are empowered to make a final ruling on their own jurisdiction, with no subsequent judicial review of the decision by any court – However, many jurisdictions allow an arbitral tribunal to render a decision on its jurisdiction, subject to substantive judicial review – The UK position is that although the arbitral tribunal is empowered to consider whether it has jurisdiction, its determination is subject to the

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examination of the courts – The courts in the United States have considered the principle of competence-competence to be intertwined with the separability presumption – The Singapore High Court has given full effect to the doctrine of competence-competence since the arbitral tribunal gets the first priority to determine issues even with respect to the very existence of the arbitration agreement, while the jurisdiction of the courts is limited to a prima facie determination – s.16 of the Arbitration Act recognizes the doctrine of competence-competence in Indian arbitration law. [Paras 115, 117, 118, 119, 120] Doctrines / Principles – Doctrine of competence-competence –Positive and negative aspects of the doctrine – Negative competence- competence – Discussed. Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The international arbitration law as well as domestic law prioritize the arbitral tribunal by permitting them to initially decide challenges to their authority instead of the courts – The policy consideration behind this approach is twofold: first, to recognize the mutual intention of the parties of choosing the arbitrator to resolve all their disputes about the substantive rights and obligations arising out of contract; and second, to prevent parties from initiating parallel proceedings before courts and delaying the arbitral process – This is the positive aspect of the doctrine of competence-competence – The negative aspect, in contrast, speaks to the national courts – It instructs the courts to limit their interference at the referral stage by deferring to the jurisdiction of the arbitral tribunal in issues pertaining to the existence and validity of an arbitration agreement – Allowing arbitral tribunals to first rule on their own jurisdiction and later allowing the courts to determine if the tribunal exercised its powers properly safeguards both the power and authority of the arbitral tribunal as well as the courts – The negative aspect of the doctrine has been expressly recognized by Indian courts – Considering both the positive and negative facets, the principle can be defined as a rule whereby arbitrators must have the first opportunity to hear challenges relating to their jurisdiction, which is subject to subsequent review by courts. [Paras 129, 130]

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N N Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. (2021) 4 SCC 379; Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram v. Bhaskar Raju and Brothers (2020) 4 SCC 612 : [2020] 3 SCR 798; Rupa Ashok Hurra v. Ashok Hurra (2002) 4 SCC 388 : [2002] 2 SCR 1006; Bharat Petroleum Corporation v. Mumbai Shramik Sangha (2001) 4 SCC 448: [2001] 3 SCR 208; Pradip Chandra Parija v. Pramod Chandra Patnaik (2002) 1 SCC 1: [2001] 5 Suppl. SCR 460; Union of India v. Hansoli Devi, (2002) 7 SCC 273: [2002] 2 Suppl. SCR 324; Central Board of Dawoodi Bohra Community v. State of Maharashtra (2005) 2 SCC 673: [2004] 6 Suppl. SCR 1054; Shilpa Sailesh v. Varun Sreenivasan 2023 SCC OnLine SC 544; Kantaru Rajeevaru v. Indian Young Lawyers Association (2020) 9 SCC 121; Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh, (1980) 1 SCC 223: [1980] 1 SC 769; Thiruvengadam Pillai v. Navaneethammal, (2008) 4 SCC 530: [2008] 3 SCR 23; Hindustan Steel Ltd. v. Dilip Construction Co. (1969) 1 SCC 597: [1969] 3 SCR 736 ; Union of India v. Popular Construction Co., (2001) 8 SCC 470: [2001] 3 Suppl. SCR 619; P Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539: [2000] 2 SCR 684; Food Corporation of India v. Indian Council of Arbitration, (2003) 6 SCC 564: [2003] 1 Suppl. SCR 568; Union of India v. Popular Construction Co., (2001) 8 SCC 470; Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677:[ 2014] 6 SCR 514; State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh (2005) 9 SCC 129:[2004] 5 Suppl. SCR 376; Owners and Parties Interested in the Vessel M.V. Polaris Galaxy v. Banque Cantonale De Geneva, 2022 SCC OnLine SC 1293; Chandavarkar Sita Ratna Rao v. Ashalata S. Guram (1986) 4 SCC 447: [1986] 3 SCR 866; ICICI Bank Ltd v. SIDCO Leathers Ltd, (2006) 10 SCC 452: [2006] 1 Suppl. SCR 528; JIK Industries Ltd. v. Amarlal V. Jumani, (2012) 3 SCC 255: [2012] 3 SCR 114; Morgan Securities & Credit (P) Ltd. v. Modi Rubber Ltd. (2006) 12 SCC 642:[2006] 10 Suppl. SCR 1022; Secur Industries Ltd v. Godrej & Boyce Mfg. Co. Ltd, (2004) 3 SCC 447: [2004] 2 SCR 705; Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd,(2022) 1 SCC 75: [2021] 1 SCR 1; Girnar Traders v. State of Maharashtra (2011) 3 SCC 1: [2011] 3 SCR 1; Fuerst Day Lawson Ltd. v. Jindal Exports Ltd, (2011) 8 SCC 333: [2011] 11 SCR 1; Pasl Wind Solutions (P) Ltd v. GE Power Conversion (India) (P) Ltd., (2021) 7 SCC 1; Kandla Export Corporation v. OCI Corporation, (2018) 14 SCC 715: [2018] 1 SCR 915; Subal Paul v. Malina Paul, (2003) 10 SCC 361: [2003] 1 SCR

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1092; Bihar State Mineral Development Corporation v. Encon Builders (2003) 7 SCC 418: [2003] 2 Suppl. SCR 812; Union of India v. Kishorilal Gupta,1959 SCC OnLine SC 6; Damodar Valley Corporation v. K K Kar (1974) 1 SCC 141: [1974] 2 SCR 240 ; Firm Ashok Traders v. Gurumukh Das Saluja(2004) 3 SCC 155: [2004] 1 SCR 404; National Agricultural Coop. Marketing Federation India Ltd. v. Gains Trading Co. (2007) 5 SCC 692; P Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corp. (2009) 2 SCC 494: [2008] 17 SCR 1217; Magma Leasing & Finance Ltd. v. Potluri Madhavilata, (2009) 10 SCC 103: [2009] 14 SCR 815; Arcelor Mittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd. (2022) 1 SCC 712; A Ayyasamy v. A Paramsivam, (2016) 10 SCC 386: [2016] 11 SCR 521; SPB & Co. v. Patel Engineering Ltd.(2005) 8 SCC 618: [2005] 4 Suppl. SCR 688; National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.(2009) 1 SCC 267: [2008] 13 SCR 638; Duro Felguera, S A v. Gangavaram Port Ltd. (2017) 9 SCC 729: [2017] 10 SCR 285; Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman (2019) 8 SCC 714: [2019] 12 SCR 123; Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. (2005) 7 SCC 234: [2005] 2 Suppl. SCR 699; CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57: [2002] 5 Suppl. SCR 387; Sultana Begum v. Prem Chand Jain (1997) 1 SCC 373: [1996] 9 Suppl. SCR 707; Kandla Export Corporation v. OCI Corporation (2018) 14 SCC 715: [2018] 1 SCR 915; Silpi Industries v. Kerala State Road Transport Corporation 2021 SCC OnLine SC 439; LIC v. D.J. Bahadur (1981) 1 SCC 315: [1981] 1 SCR 1083; Sundaram Finance Ltd. v. T. Thankam (2015) 14 SCC 444: [2015] 2 SCR 228; CDC Financial Services (Mauritius) Ltd. v. BPL Communications Ltd., (2003) 12 SCC 140; Empire Jute Co. Ltd. v. Jute Corpn. of India Ltd., (2007) 14 SCC 680: [2007] 11 SCR 388; Associate Builders v. DDA, (2015) 3 SCC 49: [2014] 13 SCR 895; Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75: [2021] 1 SCR 1 ; Hameed Joharan v. Abdul Salam (2001) 7 SCC 573: [2001] 1 Suppl. SCR 469; A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386: [2016] 11 SCR 52; State of U.P. v. Babu Ram Upadhya 1960 SCC OnLine SC 5; Emmar MGF Land Ltd. v. Aftab Singh (2019) 12 SCC 751; Intercontinental Hotels Group (India) (P) Ltd v. Waterline Hotels (P) Ltd.(2022) 7 SCC 662; Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao (1971) 1 SCC 545; Hariom Agrawal v. Prakash Chand Malviya (2007) 8 SCC 514; United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd. (2018) 17 SCC 607; Career Institute Educational Society v. Om Shree Thakurji

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Educational Society 2023 SCC OnLine SC 586; Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products (2018) 2 SCC 534: [2018] 1 SCR 848; Official Trustee, West Bengal v. Sachindra Nath Chatterjee [1969] 3 SCR 92; NTPC v. Siemens Atkeingesllchaft (2007) 4 SCC 451: [2007] 3 SCR 399; Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.(2013) 1 SCC 641: [2012] 3 SCR 402 and Seka Dobric v. SA Eonsoftech Private Limited (Decision of Supreme Court of India in Arbitration Petition No. 25 of 2023) – referred to. Sukh Lal Sheikh v. Tara Chand Ta, 1905 SCC OnLine Cal 164; Gulzari Lal Marwari v. Ram Gopal 1936 SCC OnLine Cal 275; Boottam Pitchiah v. Boyapati Koteswara Rao 1964 SCC OnLine AP 5; Mulheim Pipecoatings GmbH v. Welspun Fintrade Ltd., 2013 SCC OnLine Bom 1048 – referred to. Rio Algam v. Sammi Steel Co., Ontario Court of Justice, Canada, 1 March 1991 [1991] O.J. No. 268; Heyman v. Darwins [1942] AC 356; Harbour Assurance Co. (U.K.) Ltd. v. Kansa General International Insurance Co. Ltd. [1993] Q.B. 701; Premium Nafta Products Limited v. Fili Shipping Co. Ltd.[2007] UKHL 40; Prima Paint Corporation v. Flood & Conklin Mfg. Co.,388 US 395 (1967); Buckeye Check Cashing Inc v. Cardegna 546 U.S. 440, 440 (2006); Rent-A-Center, West, Inc. v. Jackson 2 561 U.S. 63 (2010); Dallah Real Estate and Tourism Holding Company v. The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46; Malini Ventura v. Knight Capital Pte Ltd [2015] SGHC 225; Tobler v. Justizkommission des Kantons Schwyz, DFT 59 | 177 (1933) – referred to. Gary Born, The Principle of Judicial Non-Interference in International Arbitration Proceedings’ (2009) 30 University of Pennsylvania Journal of International Law 999, 1002; Gary Born, International Arbitration Law and Practice (3rd ed, 2021) 2361; Digest of Case Law on the Model Law on International Commercial Arbitration (2012) 21, 60; Richard Garnett, ‘Article 5 of the Model Law: Protector of the Arbitral Process?’ (2021) 38(2) Journal of International Arbitration 127-146; Redfern and Hunter on International Arbitration (7th edn, Oxford University Press, 2023) 3; Stephen Schwebel, Luke Sobota, and Ryan Manton, International Arbitration: Three Salient Problems (Cambridge University Press, 2nd edn, 2020) 4; Henry Horwitz and James Oldham, ‘John Locke, John Mansfield, and Arbitration during the Eighteenth Century’ (1993) 36(1) The Historical Journal 137, 139; Earl Wolaver, ‘The Historical Background of Commercial Arbitration’

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(1934) 83 University of Pennsylvania Law Review 132, 142; Julian D M Lew, ‘Achieving the Dream: Autonomous Arbitration’ (2006) 22(2) Arbitration International 179, 183 and P Ramanatha Aiyar’s The Law Lexicon – referred to. In the judgment of Sanjiv Khanna, J. N N Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. (2023) 7 SCC 1 – overruled. Vidya Drolia and Others v. Durga Trading Corporation (2021) 2 SCC 1: [2020] 11 SCR 1001 – clarified. Javer Chand and Others. v. Pukhraj Surana AIR 1961 SC 1655: [1962] 2 SCR 333; State of Bihar v. M/s Karam Chand Thapar and Brothers Ltd. AIR 1962 SC 110: [1962] 1 SCR 827; Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao and Others (1971) 1 SCC 545: [1971] 3 SCR 590; Hameed Joharan (Dead) and Others v. Abdul Salam (Dead) by LRs. and Others (2001) 7 SCC 573: [2001] 1 Suppl. SCR 469; Dr. Chiranji Lal (D) by LRs. v. Hari Das (D) by LRs. (2005) 10 SCC 746: [2005] 1 Suppl. SCR 359; Hariom Agrawal v. Prakash Chand Malviya (2007) 8 SCC 514: [2007] 10 SCR 772; Shyamal Kumar Roy v. Sushil Kumar Agarwal (2006) 11 SCC 331: [2006] 8 Suppl. SCR 47; Avinash Kumar Chauhan v. Vijay Krishna Mishra (2009) 2 SCC 532: [2008] 17 SCR 944; Keshav Mills Co. Ltd. v. Commissioner of Income Tax, Bombay North, Ahmedabad, AIR 1965 SC 1636: [1965] 2 SCR 908; Government of Andhra Pradesh and Others v. A.P. Jaiswal and Others, (2001) 1 SCC 748; Total Environment Building Systems Pvt. Ltd. v. Deputy Commissioner of Commercial Taxes and Others, 2022 SCC OnLine SC 953; Union of India and Another v. Raghubir Singh (Dead) by LRs. etc., (1989) 2 SCC 754: [1989] 3 SCR 316; Caravel Shipping Services (P) Ltd. v. Premier Sea Foods Exim (P) Ltd. (2019) 11 SCC 461: [2018] 14 SCR 289; Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia Pvt. Ltd. (2015) 13 SCC 477: [2014] 12 SCR 488; B.O.I. FinanceLtd. v. Custodian and Others (1997) 10 SCC 488: [1997] 3 SCR 51; Canara Bank and Others v. Standard Chartered Bank (2002) 10 SCC 697; Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee (2014) 6 SCC 677: [2014] 6 SCR 514; Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd. (2021) 4 SCC 713: [2020] 10 SCR 791; Career Institute Educational Society v. Om Shree Thakurji Educational Society 2023 SCC OnLine SC 586 and Garware Wall Ropes Ltd. v. Coastal

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Marine Constructions & Engg. Ltd. (2019) 9 SCC 209: [2019] 5 SCR 579 – referred to. Ram Rattan v. Parma Nand AIR 1946 PC 51– referred to. BNA v. BNB and Another [2019] SGHC 142 and Insigma Technology Co Ltd v. Alstom Technology Ltd [2009] SGCA 24 – referred to. OTHER CASE DETAILS INCLUDING IMPUGNED ORDER AND APPEARANCES

INHERENT/CIVIL ORIGINAL JURISDICTION: Curative Petition (C) No. 44 of 2023 in Review Petition (C) No.704 of 2021 in Civil Appeal No. 1599 of 2020. From the Judgment and Order dated 20.07.2021 in RP (C) No.704 of 2021 and dated 14.02.2020 in CA No.1599 of 2020 of the Supreme Court of India. With Arbitration Petition No. 25 of 2023. Appearances: Arvind P Datar, Nikhil Sakhardande, Jayant Mehta, Sr. Advs., Debesh Panda, Ms. Amrita Panda, Naman Maheshwari, Ms. Snehal Maheshwari, Rameshwar Totala, Rahul Totala, Udbhav Gady, Ashish Venugopal, Ms. Sonali Mathur, Siddharth Sijoria, Garv Malhotra, Eshan A Chaturvedi, Arijit Sanyal, Ms. Arundhati Kale, Omar Ahmad, Pratyush Miglani, Pranav Mago, Kanishk Aggrawal, Sri Aditya Kumar, Sooraj Sharma, Ms. Payal Chawla, Ms. Hina Shaheen, Ms. Yamini Daga, Shubhra Swami Paranjpe, Raghav Bhatia, Soayib Qureshi, Advs. for the Petitioners. Shyam Divan, Nikhil Nayyar, Sr. Advs., Ms. Pritha Srikumar Iyer, Sulabh Rewari, Divyanshu Rai, Rongon Choudhary, Ms. Mansvini Jain, Atharv Gupta, Ravi Raghunath, Ms. Aakashi Lodha, Dhanaram Ramachandran, Advs. for the Respondents. Gourab Banerji, Sr. Adv., T S Sundaram, Subhro Prokas Mukherjee, Venkata Supreeth, Mohit Pandey, Rakesh Talukdar, Shashank Garg, Shivank Dideli, (Amicus in NN Global)

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Darius J Khambata, Nakul Dewan, Ms. Malvika Trivedi, K Ramakanth Reddy, Arvind Verma, Prashanto Chandra Sen, Sr. Advs., Vijayendra Pratap Singh, Abhijnan Jha, Ms. Shreya Choudhary, Ankitesh Ojha, Tushar Hathiramani, Ms. Shreenandini Mukhopadhyay, Ms. Vidhi Shah, Pradhuman Gohil, Mrs. Taruna Singh Gohil, Ms. Ranu Purohit, Alapati Sahithya Krishna, Rushabh N Kapadia, Ms. Nidhi Mittal, Neil Chatterjee, Ms. Nooreen Sarna, Ms. Tansi Fotedar, Soumil Jhanwar, Satyender Saharan, Rohan Naik, Sathvik Chandrashekar, Rahul Arya, Premlal Krishnan, Vivek Singh, Ms. Bani Dixit, Madhav Bhatia, Shailendra Slaria, Yogesh Sharma, Mukesh Sharma, Ms. Sujal, Himanshu Kapoor, Alok Tripathi, Shivam Singh, Ms. Mugdha Pande, Jaideep Khanna, Sahil Bhatia, Suyash Vyas, Ms. Shaswati Parhi, Nishant Singh, Abir Phukan, Kuriakose Varghese, V Shyamohan, Ms. Eshita Baruah, Vedant Goel, Arjun Chopra for M/s Kmnp Law, Kartik Seth, Siddharth Seth, Mrs. Shriya Gilhotra, Prashanth Dixit, Arushi Singh Rathore, Saurav Chaturvedi, Ankit Gupta, Mahesh Bhati for M/s Chambers of Kartik Seth, Dr Vivek Sharma, Sameer Rohtagi, Ms. Simran Brar, Ms. Apoorva Neral, Ms. Sanya Dua, Swastik Dalai, M/s. Karanjawala & Co, Rahul G Tanwani, Anantha Narayana MG, Shubhendu Anand, Ayush Anand, Sudipto Sircar, Aditya Shekhar, VC Shukla, Mrs Sindoora Vnl, Ms. Aditi Tripathi, Ms. Vidhi Thakar, Aman Shukla, Prastut Dalvi, Alabhya Dhamija, Manan Shanghai, Siddharth Relan, Ms. Charu Ambwani, Ms. Komal Agarwal, Ms. Kavya Vijay, Ashutosh Srivastava, Umesh Chandra Srivastava, Ms. Manisha Ambwani, Rajul Srivastav, Ms. Roohe Hina Dua, Harshit Khanduja, Randeep Sachdeva, Arun Pandit, Ms. Dhanakshi Gandhi, Sahib Kochhar, Pratham Mehrotra, Ms. Shreya Arora, Tejas Karia, Ms. Shruti Sabharwal, Ms. Vrinda Pareek, Dr. Rishab Gupta, Sanyat Lodha for Shardul S Shroff, George Pothan Poothicote, Ms. Jyoti Singh, Ms. Somya Yadava, Ms. Khyati Jain, Gauhar Mirza, Ms. Hiral Gupta, Ms. Sukanya Singh, Ms. Nilakshi Srivastava, Abhinav Chahar, Rohit Rahar, Kunal Vajani, Shubhang Tandon, Guneet Sidhu, Ms. Manisha Singh, Ashu Pathak, Siddhant Buxy, Ms. Priyanka Vora, Debanshu Khettry, Varun K Chopra, Mehul Sharma, Abhishek Kandwal for M/s VKC Law Offices, PV Amarnadha Prasad, Ms. Vijayshree Pattnaik, Debesh Panda, Ms. Diya Kapur, Raghav Kumar, Aditya Ladha, Ms. Gahena Gambani, Ms. Liz Mathew, Ankur Kashyap, Ajith S Ranganathan, Rohit Rajershi, Abhay Singh, Aman Bajaj, Advs. for the Intervenors.

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JUDGMENT / ORDER OF THE SUPREME COURT

JUDGMENT

DR. DHANANJAYA Y CHANDRACHUD, CJI A. Reference .................................................................................. 5* B. Submissions ............................................................................ 12* C. Maintainability ....................................................................... 18* D. The Indian Stamp Act 1899 ................................................... 22* i. Overview .............................................................................. 22* ii. The consequences of the failure to stamp an instrument 27* a. The procedure under the Stamp Act .......................... 27* b. The difference between inadmissibility and voidness ...32* c. Section 35 of the Stamp Act renders a document inadmissible and not void ...........................................34* iii. The purpose of the Stamp Act .......................................... 38* E. The Arbitration and Conciliation Act 1996........................... 40* i. Arbitral autonomy ............................................................. 42* ii. Principle of minimum judicial interference ................... 45* iii. The Arbitration Act is a self-contained code ................. 52* iv. Principles of modern arbitration .................................... 54* F. The law on the arbitration agreement ................................... 55* i. Separability of the arbitration agreement .......................... 56* d. United Kingdom ................................................................. 58* e. United States of America .................................................... 61* f. Singapore ............................................................................. 62*

* Ed Note: Pagination is as per the original judgment.

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g. International Conventions ................................................... 62*

h. India .................................................................................... 64*

G. The doctrine of competence-competence .............................. 70*

i. Comparative analysis ........................................................ 71*

ii. India ................................................................................... 73*

iii. Negative competence-competence .................................. 79*

H. Judicial interference under the Arbitration Act ................... 81*

I. Harmonious construction of the Arbitration Act, the Stamp Act, and the Contract Act ...............................................................97*

i. The Arbitration Act will have primacy with respect to arbitration agreements .....................................................101* a. The Arbitration Act is a special law and the Indian Contract Act and the Stamp Act are general laws ........................101* b. Section 5 of the Arbitration Act .................................... 104* c. Parliament was aware of the Stamp Act when it enacted the Arbitration Act ...............................................................106* ii. Harmonious construction of the three statutes under consideration ........................................................................106*

a. The effect of the competence-competence doctrine ..... 106*

b. The effect of the word “shall” in Sections 33 and 35 of the Stamp Act....................................................................... 111*

c. The object of the Stamp Act is preserved .....................113*

d. The interpretation of the law must give effect to the purpose of the Arbitration Act in addition to the Stamp Act...... 114*

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J. SMS Tea Estates and Garware Wall Ropes were wrongly decided ................................................................................... 115* i. SMS Tea Estates ................................................................115* ii. Garware Wall Ropes........................................................119* K. The Appointment of Arbitrators by the Chief Justice of India Scheme, 1996 ........................................................................124* L. Vidya Drolia does not deal with the issue of stamping ....... 126* M. Conclusions .......................................................................... 129*

A*. Reference

1. This Court has been called upon to resolve an issue which arose in the context of three statutes – the Arbitration and Conciliation Act 1996 1, the Indian Stamp Act 18992, and the Indian Contract Act 1872.3 The Stamp Act imposes duty on “instruments”. An instrument which is unstamped or insufficiently stamped is inadmissible in evidence and cannot be acted upon in terms of its provisions. Arbitration agreements are often embedded in underlying instruments or substantive contracts. When an application is made for the appointment of an arbitrator, an objection is raised on the ground that the arbitration agreement is inadmissible because it is in an instrument which is unstamped or inadequately stamped. The primary issue that arises is whether such arbitration agreements would be non-existent, unenforceable, or invalid if the underlying contract is not stamped. A brief description of the context in which this question arises follows.

2. In N N Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.,4 (hereinafter referred to as “N N Global 1”) a Bench of three Judges of this Court was called upon in a Special Leave Petition to determine the enforceability of an arbitration agreement contained in an unstamped work order. The Bench, speaking through Justice Indu Malhotra, held that

* Ed. Note: PART A 1 “Arbitration Act” 2 “Stamp Act” 3 “Contract Act” 4 (2021) 4 SCC 379

p. 1096

an arbitration agreement, being separate and distinct from the underlying commercial contract, would not be rendered invalid, unenforceable, or non-existent. The Court held that the non-payment of stamp-duty would not invalidate even the underlying contract because it is a curable defect. In the process, this Court adopted a view at variance with SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd5 and Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.6 In SMS Tea Estates (supra), a two-Judge Bench of this Court held that an arbitration agreement in an unstamped contract could not be acted upon. A two-Judge Bench of this Court in Garware Wall Ropes (supra) relied on SMS Tea Estates (supra) to hold that an arbitration agreement in an unstamped commercial contract would not “exist” as a matter of law and could not be acted upon until the underlying contract was duly stamped: “22. When an arbitration clause is contained “in a contract”, it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how, under the Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore, even a plain reading of Section 11(6-A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the Contract Act, would make it clear that an arbitration clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that SMS Tea Estates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] has, in no manner, been touched by the amendment of Section 11(6-A). […]

29. This judgment in Hyundai Engg. case [United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] is important in that what was specifically under consideration was an arbitration clause which would get activated only if an insurer admits or accepts liability. Since on facts it was found that the insurer repudiated the claim, though an arbitration

5 (2011) 14 SCC 66 6 (2019) 9 SCC 209

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clause did “exist”, so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, namely, that the insurer has not admitted or accepted liability. Likewise, in the facts of the present case, it is clear that the arbitration clause that is contained in the sub-contract would not “exist” as a matter of law until the sub-contract is duly stamped, as has been held by us above. The argument that Section 11(6-A) deals with “existence”, as opposed to Section 8, Section 16 and Section 45, which deal with “validity” of an arbitration agreement is answered by this Court’s understanding of the expression “existence” in Hyundai Engg. case [United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530], as followed by us.” Thereafter, a three-Judge Bench of this Court in Vidya Drolia v. Durga Trading Corporation,7 cited paragraph 29 of Garware Wall Ropes (supra) (extracted above) with approval for the proposition that an arbitration agreement exists only when it is valid and legal: “146. We now proceed to examine the question, whether the word “existence” in Section 11 merely refers to contract formation (whether there is an arbitration agreement) and excludes the question of enforcement (validity) and therefore the latter falls outside the jurisdiction of the court at the referral stage. On jurisprudentially and textualism it is possible to differentiate between existence of an arbitration agreement and validity of an arbitration agreement. Such interpretation can draw support from the plain meaning of the word “existence”. However, it is equally possible, jurisprudentially and on contextualism, to hold that an agreement has no existence if it is not enforceable and not binding. Existence of an arbitration agreement presupposes a valid agreement which would be enforced by the court by relegating the parties to arbitration. Legalistic and plain meaning interpretation would be contrary to the contextual background including the definition clause and would result in unpalatable consequences. A reasonable and just interpretation of “existence” requires understanding the context, the purpose and the relevant legal

7 (2021) 2 SCC 1

p. 1098

norms applicable for a binding and enforceable arbitration agreement. An agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. A party cannot sue and claim rights based on an unenforceable document. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law.

147. We would proceed to elaborate and give further reasons: 147.1. (i) In Garware Wall Ropes Ltd. [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] , this Court had examined the question of stamp duty in an underlying contract with an arbitration clause and in the context had drawn a distinction between the first and second part of Section 7(2) of the Arbitration Act, albeit the observations made and quoted above with reference to “existence” and “validity” of the arbitration agreement being apposite and extremely important, we would repeat the same by reproducing para 29 thereof : (SCC p. 238) […] Existence and validity are intertwined, and arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement.”

3. N N Global 1 (supra) noted the decision of the co-ordinate Bench in Vidya Drolia (supra) and doubted the correctness of the view adopted in paragraphs 22 and 29 of Garware Wall Ropes (supra) and in paragraphs 146 and 147 of Vidya Drolia (supra) (extracted above). It referred the following issue to a Bench of five Judges: “58. […] Whether the statutory bar contained in Section 35 of the Stamp Act, 1899 applicable to instruments chargeable to stamp duty under Section 3 read with the Schedule to the Act, would also render the arbitration agreement contained in such an instrument, which is not chargeable to payment of stamp duty, as being non-existent,

UNDER 1099 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

unenforceable, or invalid, pending payment of stamp duty on the substantive contract/ instrument?”

4. The Constitution Bench in N N Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.8 (hereinafter referred as “N N Global 2”) answered the reference. By a majority of 3:2, it was held that NN Global 1 (supra) does not represent the correct position of law. The majority judgment (authored by Justice K. M. Joseph for himself and Justice Aniruddha Bose with a concurring judgment by Justice C. T. Ravikumar) upheld the view taken by this Court in SMS Tea Estates (supra) and Garware Wall Ropes (supra). Justice Ajay Rastogi and Justice Hrishikesh Roy delivered separate dissenting judgments. The conclusions of the majority can be summarized in the following terms: a. An unstamped instrument containing an arbitration agreement is void under Section 2(g) of the Contract Act; b. An unstamped instrument, not being a contract and not enforceable in law, cannot exist in law. The arbitration agreement in such an instrument can be acted upon only after it is duly stamped; c. The “existence” of an arbitration agreement contemplated under Section 11(6A) of the Arbitration Act is not merely a facial existence or existence in fact, but also “existence in law”; d. The Court acting under Section 11 of the Arbitration Act cannot disregard the mandate of Sections 33 and 35 of the Stamp Act requiring it to examine and impound an unstamped or insufficiently stamped instrument; and e. The certified copy of an arbitration agreement must clearly indicate the stamp duty paid.

5. The minority judgment adopted a different legal approach. Justice Ajay Rastogi noted that the scope of the referral court under Section 11 is limited to the examination of the “existence” of an arbitration agreement. He held that all the other debatable issues, including the issue of stamping,

8 (2023) 7 SCC 1

p. 1100

must be left for the arbitral tribunal to decide in view of Section 16 of the Arbitration Act.

6. Justice Hrishikesh Roy relied on the scheme of the Stamp Act to hold that an unstamped or insufficiently stamped document is not rendered invalid or void ab initio because the failure to stamp an instrument is a curable defect. Further, Justice Roy traced the evolution of the Arbitration Act to observe that it promotes minimum judicial interference in the arbitral process. He held that Section 11 of the Arbitration Act should be harmonized with Section 35 of the Stamp Act by deferring the issue of stamping to the arbitrator. In conclusion, Justice Roy held that SMS Tea Estates (supra) and Garware Wall Ropes (supra) do not set out the correct position of law.

7. On 14 February 2020, a three-Judge Bench of this Court in Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram v. Bhaskar Raju and Brothers9 cited SMS Tea Estates (supra) with approval. In Bhaskar Raju (supra), this Court reversed the decision of the High Court which had relied on an insufficiently stamped lease deed to refer the parties to arbitration under Section 11(6) of the Arbitration Act. Bhaskar Raju (supra) was decided before N N Global 1 (supra). However, while the reference made by the three-Judge Bench in N N Global 1 (supra) was pending, review petitions were filed in Bhaskar Raju (supra). On 20 July 2021, the review petition was dismissed on the ground of delay as well as on merits.10 On 7 December 2022, a curative petition was filed seeking a reconsideration of Bhaskar Raju (supra). The Constitution Bench in N N Global 2 (supra) answered the reference and delivered its verdict on 25 April 2023.

8. On 8 May 2023, a three-Judge Bench of this Court issued notice in a petition for the appointment of an arbitrator in Seka Dobric v. SA Eonsoftech Private Limited.11 In the meantime, on 18 July 2023, a five- Judge Bench of this Court issued notice in the curative petition in Bhaskar Raju (supra) and listed the matter for hearing in open court on 24 August

9 (2020) 4 SCC 612 10 Review Petition (Civil) No. 704/2021 in CA No. 1599/2020. 11 Arbitration Petition No. 25 of 2023

UNDER 1101 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

2023.12 On 14 August 2023, the Bench in Seka Dobric (supra) observed that one of the objections in that matter pertained to non-stamping of the arbitration agreement. Therefore, the arbitration petition was directed to be listed along with the curative petition in Bhaskar Raju (supra). The relevant part of the order is extracted below: “1. One of the objections which has been raised on behalf of the respondent in response to the petition under Section 11(6) and 11(9) of the Arbitration and Conciliation Act, 1996, is that the arbitration agreement is not stamped.

2. Notice has already been issued by this Court on Curative Petition (Civil) No 44 of 2023 which has been directed to be listed in the open Court on 24 August 2023.

3. These proceedings shall be accordingly listed on 24 August 2023 together with the Curative Petition.

4. Counter affidavit, if any, be filed in the meantime.”

9Copy pinpoint9. On 26 September 2023, a Bench of five Judges took up the arbitration petition along with the curative petition. Considering the larger ramifications and consequences of the decision in N N Global 2 (supra), the Court referred the proceedings to a seven-Judge Bench. The relevant portion of the order is extracted below: “2. Having regard to the larger ramifications and consequences of the view of the majority in N N Global Mercantile Private Limited vs Indo Unique Flame Limited and Others, we are of the considered view that the proceedings should be placed before a seven-Judge Bench to reconsider the correctness of the view of the five-Judge Bench.”

10Copy pinpoint10. It is in this context that the proceedings were listed before this Bench of seven Judges on 11 October 2023, when this Court directed the cause title to be changed to: “In Re: Interplay between the arbitration agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899.” We are not reproducing the factual matrix of the case(s)

12 Curative Petition (Civil) No. 44 of 2023 in Review Petition (Civil) No. 704 of 2021 in Civil Appeal No. 1599 of 2020.

p. 1102

in question as we have been called upon to determine the question of law. In the process, we will consider the correctness of the view adopted in N N Global 2 (supra) as well as other ancillary issues. B*. Submissions

11Copy pinpoint11. The petitioners broadly contend that N N Global 2 (supra) does not lay down the correct position of law. The submissions of the learned counsel on behalf of the petitioners and the intervenors are summarized below.

12Copy pinpoint12. Mr Arvind Datar, learned senior counsel, made the following submissions: a. Section 11(6A) of the Arbitration Act expressly confines the referral court’s power to the examination of the existence of an arbitration agreement. Such examination does not extend to the adequacy of the stamping under Section 33 of the Stamp Act; b. The majority in N N Global 2 (supra) has effectively nullified Section 11(6A) which confined the jurisdiction of this Court and High Court to the examination of the existence of an arbitration agreement; c. Mandating the courts at the referral stage to follow the prescriptions contained under Section 33 of the Stamp Act would amount to exceeding the remit of examination. The Arbitration Act confines the authority of referral court to the examination of an arbitration agreement and not the instrument; d. The arbitral tribunal has the competence to rule on its own jurisdiction, including on issues pertaining to stamping; e. The inclusion of the non-obstante clause in Section 5 of the Arbitration Act limits the judicial intervention of courts in the arbitral process and must be read harmoniously with the provisions of the Stamp Act; and f. The requirement of stamping does not render an instrument void. It only makes the instrument inadmissible in evidence until the defect is cured in accordance with the provisions of the Stamp Act. * Ed. Note: PART B

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1103 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

13Copy pinpoint13. Mr Nikhil Sakhardande, learned senior counsel, made the following submissions: a. The deficiency in stamping is a curable defect, the effect of which ceases to operate as soon as the revenue interest of the state is secured; b. The non-payment of stamp duty, being a temporary affliction, cannot affect the validity of an arbitration agreement; and c. Mandating the courts at the Section 8 or Section 11 stage of the Arbitration Act to examine the issue of stamping will defeat the legislative purpose of minimal judicial interference enshrined in Section 5 of the Arbitration Act.

14Copy pinpoint14. Mr Darius J Khambata, learned senior counsel, made the following submissions: a. The doctrine of separability recognizes that an arbitration agreement is a self-contained agreement, distinct from the underlying contract; b. An arbitration agreement contained within an underlying contract would be a “distinct matter” in terms of Section 5 of the Stamp Act, and would therefore continue to remain valid and enforceable notwithstanding the non-stamping or inadequate stamping of the contract; c. The majority in N N Global 2 (supra) failed to give full effect to the doctrine of separability by incorrectly holding that non- stamping of the underlying contract would ipso facto invalidate the arbitration agreement contained in such contract; d. The inadmissibility of a document on account of non-stamping or insufficient stamping does not result in the document being void, invalid, or non-existent in law; e. The majority in N N Global 2 (supra) disregarded the principle of competence-competence by mandating the referral court under Section 11 to examine an instrument for stamping;

p. 1104

f. At the pre-arbitral stage, the referral courts should leave all issues pertaining to the stamping for the decision of the arbitral tribunal; and g. Section 33 of the Stamp Act provides that a person can have authority by “consent of parties” to determine issues of stamping. Such authority necessarily includes an arbitral tribunal which is constituted by the consent of parties through an arbitration agreement.

15Copy pinpoint15. Mr Gourab Banerjee, learned senior counsel, made the following submissions: a. The object of the legislature in enacting the Stamp Act is to protect public revenue and not to interfere with commercial life by invalidating instruments vital to the smooth flow of trade and commerce; b. Non-stamping does not render an instrument null and void. Such instrument, even if unstamped, exists in fact and law; c. Investigation into the aspects of stamping at the referral stage under Section 11(6A) of the Arbitration Act is contrary to the plain language and legislative intent of the said provision; and d. The adjudication of stamp duty is a time-consuming process. Mandating the court under Section 11 of the Arbitration Act to adjudicate on the issue of stamp duty would be against the goal of expeditious appointment of arbitrators contained under Section 11(13) of the Arbitration Act.

16Copy pinpoint16. Mr Jayant Mehta, learner senior counsel, made the following submissions: a. Although compliance with the provisions of the Stamp Act is imperative, its non-compliance is curable and does not render an unstamped or insufficiently stamped instrument void or invalid; b. The majority view in N N Global 2 (supra) does not deal with Section 9 of the Arbitration Act creating a serious difficulty in seeking interim measures of protection in both domestic as well as international arbitrations seated in India; and

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1105 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

c. A fiscal statute does not bar the entertainability of a lis, except where the statute specifically so prescribes. The Stamp Act does not prescribe a bar on the entertainability of a lis.

17Copy pinpoint17. The respondents largely contend that N N Global 2 (supra) is correct and is in line with the consistent position adopted by this Court in SMS Tea Estates (supra) and Garware Wall Ropes (supra), which ought not to be disturbed. The submissions of the learned counsel for the respondents and intervenors are summarized below.

18Copy pinpoint18. Mr Shyam Divan, learned senior counsel, made the following submissions: a. The curative petition is not maintainable because none of the pleaded grounds meet the requirements set out in Rupa Ashok Hurra v. Ashok Hurra.13 Since the curative petition is not maintainable, the reference to a seven-Judge Bench is without jurisdiction; b. The examination by the court under Section 11(6A) of the Arbitration Act is not confined to mere facial existence of an arbitration agreement. The referral court has to prima facie examine both the existence and validity of an arbitration agreement; c. Section 33 of the Stamp Act casts a mandatory legal requirement on courts under Section 11 proceedings to impound an unstamped or insufficiently stamped instrument. Such an instrument cannot be admitted in evidence or otherwise acted upon until the stamp duty and requisite penalty is paid; and d. Section 5 of the Arbitration Act does not limit the operation of the mandatory provisions of the Stamp Act.

19Copy pinpoint19. Mr. Nikhil Nayyar, learned senior counsel, made the following submissions: a. The expression “examination” used in Section 11(6A) contemplates the examination of the validity of an arbitration

13 (2002) 4 SCC 388

p. 1106

agreement, including the examination of sufficiency of stamping; and b. The inclusion of Section 11(6A) in the Arbitration Act was not intended to overcome the effect of SMS Tea Estates (supra).

20Copy pinpoint20. Mr Nakul Dewan, learned senior counsel, made the following submissions: a. The principle of separability contained in Section 16 of the Arbitration Act implies that an arbitration agreement can be treated as a distinct agreement only for the purpose of determining its validity or enforceability; b. The court exercising powers under Section 11 is not designated by the parties to receive evidence for the purpose of substantive adjudication of the rights and obligations of the parties; and c. Even if an instrument containing an arbitration agreement is unstamped or insufficiently stamped, such inadequacy or insufficiency should not derail the appointment of an arbitrator at the referral stage under Section 11(6A) of the Arbitration Act.

21Copy pinpoint21. Ms Madhavi Divan, Mr Prashanto Chandra Sen, Mr Arvind Varma, Mr Ramesh Singh, Mr K Ramakant Reddy, Mr Rahul G. Tanwani, Mr Abir Phukan, Mr Tejas Karia, Mr Pallav Mongia, Mr Kunal Vajani, Ms Apporva Neral, Mr Varun K Chopra, Dr. P. V. Amamadha Prasad, Mr Gauhar Mirza, Ms Hiral Gupta, Mr George Poothan Poothicote, Ms Manisha Singh, Mr Shadan Farasat, Mr Saurav Agarwal, Mr Siddhant Buxy, Ms Priyanka Vora, Mr Debanshu Khettry, Mr Shivam Singh, Ms Diya Kapur and Mr Jatinder Kumar Sethi supplemented these submissions. C*. Maintainability

22Copy pinpoint22. We address the preliminary issue of the maintainability of the present proceedings in this segment. The record of proceedings indicates that notice was issued in the curative petition on 18 July 2023. Subsequently, in Seka Dobric (supra), a three-Judge Bench of this Court while hearing a Section 11 application for the appointment of arbitrators, directed the proceedings to be listed along with the curative petition. On 26 September 2023, the five-Judge Bench differed with the view taken in N N Global 2 * Ed. Note: PART C

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1107 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

(supra) and referred the issue to a seven-Judge Bench. Thus, it is important to note that along with the curative petition, a Section 11 petition is also listed before this Court in the present proceedings.

23Copy pinpoint23. The maintenance of judicial discipline is important for ensuring consistency and certainty in the development of law. The rule of judicial discipline demands that a Bench of lower strength is bound by the decision of a larger Bench.14 Judicial discipline also dictates that generally, a Bench of the same strength can question the correctness of a decision rendered by a co-ordinate Bench. In such a situation, the matter is placed before a Bench of larger strength.15

24Copy pinpoint24. However, there have been situations where a Bench of lower strength has differed with the decision rendered by a Bench of larger strength. In Union of India v. Hansoli Devi,16 a Bench of two Judges of this Court differed with a three-Judge Bench in matter pertaining to the interpretation of the Land Acquisition Act 1894 and referred the matter to a Constitution Bench. The Constitution Bench observed that the reference made by the two-Judge Bench was “improper”. Nevertheless, the Constitution Bench decided to answer the reference “since the questions involved are pending in many cases in different High Courts and certain doubts have arisen with regard to the interpretation to the provisions of Section 28-A of the Act.” In Central Board of Dawoodi Bohra Community v. State of Maharashtra,17 a Constitution Bench of this Court held that the judicial course adopted in Hansoli Devi (supra) was by way of exception rather than a rule. Therefore, the rule of judicial discipline also has certain well-defined exceptions.

25Copy pinpoint25. The respondent has relied on the Constitution Bench decision of this Court in Shilpa Sailesh v. Varun Sreenivasan,18 to submit that there is no live cause or matter to justify the invocation of this Court’s jurisdiction. The issue before the three-Judge Bench in Seka Dobric (supra) pertains to the appointment of an arbitrator at Section 11 stage when the underlying contract is unstamped or insufficiently stamped. The Bench directed the

14 Bharat Petroleum Corporation v. Mumbai Shramik Sangha, (2001) 4 SCC 448 15 Pradip Chandra Parija v. Pramod Chandra Patnaik, (2002) 1 SCC 1 16 (2002) 7 SCC 273 17 (2005) 2 SCC 673 18 2023 SCC OnLine SC 544

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Section 11 application to be listed along with the curative petition in view of the wider legal ramifications flowing from N N Global 2 (supra). Therefore, the respondent’s argument is misplaced because Seka Dobric (supra), which is a live cause or matter, is also listed along with the curative petition.

26Copy pinpoint26. The respondent has also argued that it was improper for the Constitution Bench to exercise its curative jurisdiction to refer the matter to this Bench of seven Judges. Order VI Rule 2 of the Supreme Court Rules 2013 provide that if a Bench in the course of hearing any cause, appeal or “other proceedings” considers that the matter be dealt with by a larger bench, it shall refer the matter to the Chief Justice, who shall thereupon constitute such a Bench for the hearing of the matter. In Kantaru Rajeevaru v. Indian Young Lawyers Association,19 a nine-Judge Bench of this Court held that the term “other proceeding” used in Order VI Rule 2 of the Supreme Court Rules, 2013 is a comprehensive term giving widest freedom to a court of law to do justice to the parties in the case. Accordingly, it was held that review petitions also fall within the purview of the expression “other proceeding.” In view of the decision in Kantaru Rajeevaru (supra), the term “other proceeding” under Order VI Rule 2 of the Supreme Court Rules, 2013 will also include curative petitions. Therefore, we find no impropriety in the reference made to this Bench.

27Copy pinpoint27. Moreover, the reference raises important issues on points of law, which require immediate consideration. In Central Board of Dawoodi Bohra Community (supra), this Court laid down two exceptions to the rules mentioned above: “12. (3) The above rules are subject to two exceptions: (i) the abovesaid rules do not bind the discretion of the Chief Justice in whom vests the power of framing the roster and who can direct any particular matter to be placed for hearing before any particular Bench of any strength; and (ii) in spite of the rules laid down hereinabove, if the matter has already come up for hearing before a Bench of larger quorum and that Bench itself feels that the view of the law taken by a Bench of lesser quorum, which view is in doubt, needs correction or reconsideration then by way of exception (and not as a rule) and for reasons given by

19 (2020) 9 SCC 121

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1109 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

it, it may proceed to hear the case and examine the correctness of the previous decision in question dispensing with the need of a specific reference or the order of the Chief Justice constituting the Bench and such listing. Such was the situation in Raghubir Singh [(1989) 2 SCC 754] and Hansoli Devi [(2002) 7 SCC 273].”

28Copy pinpoint28. The two exceptional situations laid down in Central Board of Dawoodi Bohra community (supra) have to be invoked cautiously, and in situations involving wide ramifications for the law. In Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh,20 Justice V R Krishna Iyer speaking for the Constitution Bench observed that the “legislative policy in the country must accept as final the pronouncements of this Court by a Constitution Bench unless the subject be of such fundamental importance to national life or the reasoning is so plainly erroneous in light of the later thought that it is wiser to be ultimately right than to be consistently wrong.” We are of the opinion that the reference by the five-Judge Bench raises question of seminal importance with regard to the interpretation and application of the arbitration law in India, which in turn has implications for business and commerce in the country. Accordingly, we will answer the reference without delving into the facts of the individual cases. The issue of maintainability of the curative petition is left open and could be raised by the respondent before an appropriate Bench. D*. The Indian Stamp Act 1899 i. Overview

29Copy pinpoint29. As the title suggests, the Stamp Act is a legislation which consolidates the laws relating to the payment of stamp-duty on the execution of certain instruments in the manner specified in the statute. Section 2(14) defines “instrument” as follows: “(14) “instrument” includes— (a) every document, by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded;

* Ed. Note: PART D 20 (1980) 1 SCC 223

p. 1110

(b) a document, electronic or otherwise, created for a transaction in a stock exchange or depository by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded; and (c) any other document mentioned in Schedule I, but does not include such instruments as may be specified by the Government, by notification in the Official Gazette”

30Copy pinpoint30. The term “instrument” is defined broadly, in an inclusive sense. It includes electronic documents. Schedule I to the Stamp Act contains descriptions of various instruments along with the stamp duty payable on each of them. Stamp-duty is liable to be paid under Section 3, which provides as follows: “3. Instrument chargeable with duty.—Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefore, respectively, that is to say— (a) every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in India on or after the first day of July, 1899; (b) every bill of exchange payable otherwise than on demand, or promissory note drawn or made out of India on or after that day and accepted or paid, or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in India; and (c) every instrument (other than a bill of exchange or promissory note) mentioned in that Schedule, which, not having been previously executed by any person, is executed out of India on or after that day, relates to any property situate, or to any matter or thing done or to be done, in India and is received in India: Provided that no duty shall be chargeable in respect of— (1) any instrument executed by, or on behalf of, or in favour of, the Government in cases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument;

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1111 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

(2) any instrument for the sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Merchant Shipping Act, 1894, or under Act, 19 of 1838, or the India Registration of Ships Act, 1841, as amended by subsequent Acts. (3) any instrument executed, by, or, on behalf of, or, in favour of, the Developer, or Unit or in connection with the carrying out of purposes of the Special Economic Zone. Explanation.—For the purposes of this clause, the expressions “Developer”, “Special Economic Zone” and “Unit” shall have meanings respectively assigned to them in clauses (g), (za) and (zc) of Section 2 of the Special Economic Zones Act, 2005.”

31Copy pinpoint31. Section 3 provides that the three categories of instruments in clauses (a), (b) and (c) shall be chargeable with duty of the amount indicated in Schedule I. The proviso to Section 3 indicates three other categories in respect of which no duty shall be chargeable. In terms of Section 5 of the Stamp Act, the duty chargeable on any instrument which comprises or relates to several distinct matters is the aggregate amount of the duties with which separate instruments (each comprising or relating to one of the many matters) would be chargeable under the same statute. Section 6 governs situations where the same instrument falls within two or more of the descriptions in Schedule I. In such a situation, if the duties chargeable under the different descriptions are different, the instrument shall be chargeable with the highest of them. The rule in Section 6 is subject to the provisions of Section 5. As a consequence, Section 6 cannot be relied on to avoid the payment of stamp-duty if an instrument relates to several distinct matters with each such matter covered by a distinct entry in Schedule I. Section 6 is applicable only when an instrument relates to a single matter which is covered by two or more descriptions in Schedule I, or when a single matter in an instrument relating to several distinct matters is covered by two or more descriptions in that schedule.

32Copy pinpoint32. Sections 13 and 14 indicate the mode of stamping. In terms of Section 13, every instrument written upon paper stamped with an impressed

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stamp shall be written in such manner that the stamp may appear on the face of the instrument and cannot be used for or applied to any other instrument. Section 14 stipulates that no second instrument chargeable with duty shall be written upon a piece of stamped paper upon which an instrument chargeable with duty has already been written.21 Section 15 is significant because it indicates the effect of non-compliance with Sections 13 and 14: instruments written in contravention of Section 13 or Section 14 shall be deemed to be unstamped.22

33Copy pinpoint33. Chapter II of the Stamp Act provides for various other contingencies or situations, including inter alia policies of sea-insurance,23 bonds, debentures, and securities,24 transactions in stock exchanges and depositories,25 and instruments executed outside India.26 Chapter II also provides for the valuation of stamp-duty, including for the conversion of amounts expressed in foreign currencies,27 how to value stock and marketable securities,28 the effect of statement of rate of exchange or average price,29 instruments reserving interest,30 instruments connected with mortgages of marketable securities,31 how the transfer and consideration of debt etc. is to be charged,32 valuation in case of annuity,33 stamp where value of subject- matter is indeterminate.34

21 The proviso to Section 14 provides as follows “Provided that nothing in this section shall prevent any endorsement which is duly stamped or is not chargeable with duty being made upon any instrument for the purpose of transferring any right created or evidenced thereby, or of acknowledging the receipt of any money or goods the payment or delivery of which is secured thereby.” 22 Section 15, Stamp Act 23 Section 7, Stamp Act 24 Sections 8 to 8F, Stamp Act 25 Section 9A, Stamp Act 26 Sections 18, 19, Stamp Act 27 Section 20, Stamp Act 28 Section 21, Stamp Act 29 Section 22, Stamp Act 30 Section 23, Stamp Act 31 Section 23A, Stamp Act 32 Section 24, Stamp Act 33 Section 25, Stamp Act 34 Section 26, Stamp Act

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1113 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

34Copy pinpoint34. Section 29 indicates who the stamp duty is to be borne by (in the absence of an agreement to the contrary) and Section 30 stipulates that a receipt must be given in certain cases.

35Copy pinpoint35. A person may also apply to the Collector for his opinion as to the duty (if any) which is payable on a particular instrument, under Section 31 of the Stamp Act. The instrument given to the Collector for his opinion may be executed or previously stamped, but there is no requirement that it must be either executed or previously stamped.35 If an instrument brought to the Collector under Section 31 is in their opinion chargeable with duty, and they determine that it is already fully stamped, or that the duty determined by them under Section 31 has already been paid, then they shall certify by endorsement on such instrument that the full duty with which it is chargeable has been paid.36 If the Collector is of the opinion that the instrument is not chargeable with duty, they shall certify that it is not so chargeable.37 Any instrument upon which an endorsement has been made under Section 32 shall be deemed to be duly stamped or not chargeable with duty, as the case may be.38 The proviso to Section 32 lists three categories of instruments which the Collector is not authorised to endorse under the same section.

36Copy pinpoint36. Chapter IV of the Stamp Act details with the procedure to be followed by various authorities if instruments which are liable to be stamped are not duly stamped. The provisions of this Chapter are examined in detail in the subsequent segment. Chapter V provides for allowances for stamps (such as spoiled or misused stamps) in certain cases and Chapter VI provides for reference of cases arising under the enactment to authorities including the High Courts as well as for the revision of certain decisions of courts regarding the sufficiency of stamps. Chapter VII of the Stamp Act indicates the penalties for non-compliance with its provisions and finally, Chapter VIII contains certain supplementary provisions in relation to the statute.

35 Section 31(1), Stamp Act 36 Section 32(1), Stamp Act 37 Section 32(2), Stamp Act 38 Section 32(3), Stamp Act

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ii. The consequences of the failure to stamp an instrument a. The procedure under the Stamp Act

37Copy pinpoint37. Section 17 of the Stamp Act provides that all instruments chargeable with duty and executed by any person in India shall be stamped before or at the time of execution. Section 62 inter alia penalises a failure to comply with Section 17. However, despite the mandate that all instruments chargeable with duty must be stamped, many instruments are not stamped or are insufficiently stamped. The parties executing an instrument may, contrary to the mandate of law, attempt to avoid the payment of stamp duty and may therefore refrain from stamping it. Besides this situation, there are other ways in which an instrument may not be properly stamped, including the following: a. The duty may have been paid under an incorrect description under Schedule I; b. The duty paid may be of a sufficient amount but of improper description; c. The provisions of Section 5 which govern instruments relating to several distinct matters may not have been complied with; or d. The instrument may be written in contravention of Sections 13 and 14, and thereby deemed to be unstamped in terms of Section 15.

38Copy pinpoint38. The legislature recognized that the mandate of the Stamp Act may not be complied with because of the reasons listed in the preceding paragraph or otherwise. It was in recognition of this fact that the provisions in Chapter IV were enacted. Section 33 provides that every person who has authority to receive evidence (either by law or by consent of parties) shall impound an instrument which is, in their opinion, chargeable with duty but which appears to be not duly stamped. The power under Section 33 may be exercised when an instrument is produced before the authority or when they come across it in the performance of their functions. Persons in charge of public office except police officers are similarly empowered under Section 33, which is reproduced below:

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1115 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

“33. Examination and impounding of instruments.—(1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same. (2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him, in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in India when such instrument was executed or first executed: Provided that— (a) nothing herein contained shall be deemed to require any Magistrate or Judge of a Criminal Court to examine or impound, if he does not think fit so to do, any instrument coming before him in the course of any proceeding other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898 (5 of 1898); (b) in the case of a Judge of a High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court appoints in this behalf. (3) For the purposes of this section, in cases of doubt,— (a) the State Government may determine what offices shall be deemed to be public offices; and (b) the State Government may determine who shall be deemed to be persons in charge of public offices.”

39Copy pinpoint39. Section 35 is of particular significance to the issue before this Court – it renders instruments which are not duly stamped inadmissible in evidence. Section 35 reads as follows: “35. Instruments not duly stamped inadmissible in evidence, etc.— No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or

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authenticated by any such person or by any public officer, unless such instrument is duly stamped: Provided that— (a) any such instrument [shall] be admitted in evidence on payment of the duty with which the same is chargeable or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion; (b) where any person from whom a stamped receipt could have been demanded, has given an unstamped receipt and such receipt, if stamped, would be admissible in evidence against him, then such receipt shall be admitted in evidence against him on payment of a penalty of one rupee by the person tendering it; (c) where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and any one of the letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped; (d) nothing herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898 (5 of 1898); (e) nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of the Government or where it bears the certificate of the Collector as provided by Section 32 or any other provision of this Act.” (emphasis supplied) In terms of Section 35, an instrument which is not duly stamped is inadmissible in evidence for any purpose and it shall not be acted upon, registered, or authenticated.39 Clause (a) of the proviso to Section 35

39 Subject to the proviso to Section 35.

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1117 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

stipulates that the bar contained in the provision is removed upon the payment of duty and the penalty (if any). The party or parties may pay the duty chargeable to the person who has the authority to receive evidence by law or by consent of parties. Section 35 is significant because it gives teeth to the Stamp Act by ensuring that stamp-duty is paid before rights and obligations arising from an agreement are enforced.

40Copy pinpoint40. Section 38(1) indicates how an instrument which is impounded is to be dealt with: “38. Instruments impounded how dealt with.— (1) Where the person impounding an instrument under Section 33 has by law or consent of parties authority to receive evidence and admits such instrument in evidence upon payment of a penalty as provided by Section 35 or of duty as provided by Section 37, he shall send to the Collector an authenticated copy of such instrument, together with a certificate in writing, stating the amount of duty and penalty levied in respect thereof, and shall send such amount to the Collector, or to such person as he may appoint in this behalf. (2) In every other case, the person so impounding an instrument shall send it in original to the Collector.”

41Copy pinpoint41. The Collector is conferred with the power to impound an instrument under Section 33. If any other person or authority impounds an instrument, it must be forwarded to the Collector under clause (2) of Section 38. Once the Collector receives an instrument, he has the power to stamp it under Section 40, if it is not a bill of exchange, a promissory note, or an instrument that is chargeable with a duty that exceeds ten naye paise. The Collector may: a. Certify by endorsement that the instrument is duly stamped, if they are of such an opinion;40 b. Certify by endorsement that the instrument is not chargeable with duty, if they are of such an opinion;41 and

40 Section 40(1)(a), Stamp Act 41 ibid

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c. Require the payment of the proper duty or the amount required to make up the proper duty, if they are of the opinion that the instrument is chargeable with duty and is not duly stamped.42 The Collector may also levy a penalty, as provided by Section 40. If the instrument has been sent to the Collector under Section 38, it must be returned to the impounding officer after it is dealt with as described above.43

42Copy pinpoint42. In terms of Section 42 of the Stamp Act, an instrument is admissible in evidence once the payment of duty and a penalty (if any) is complete. It stipulates that either the person admitting the instrument in evidence or the Collector, as the case may be, shall certify by endorsement that the proper duty has been paid.

43Copy pinpoint43. The procedure contemplated by the Stamp Act facilitates the collection of revenue. It permits instruments to be impounded not only by persons in charge of a public office or those who are empowered by law to receive evidence but also by any person who is empowered to receive evidence by consent of parties. The statute then sets out the procedure to be followed upon impounding a document. This procedure ensures that stamp-duty is paid. After the payment of the appropriate amount under the appropriate description in Schedule I and the penalty (if any), the Stamp Act provides for the certification of such payment by an endorsement by the appropriate authority. Once an instrument has been endorsed, it may be admitted into evidence, registered, acted upon or authenticated as if it had been duly stamped. b. The difference between inadmissibility and voidness

44Copy pinpoint44. The admissibility of an instrument in evidence is distinct from its validity or enforceability in law. Section 2(g) of the Contract Act provides that an agreement not enforceable by law is said to be void. The admissibility of a particular document or oral testimony, on the other hand, refers to whether or not it can be introduced into evidence. P Ramanatha Aiyar’s The Law Lexicon defines ‘admissible’ thus:

42 Section 40(1)(b), Stamp Act 43 Section 40(3), Stamp Act

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1119 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

“Admissible Proper to be received, capable and worthy of being admitted. As applied to evidence, the term means that it is of such a character that the court or judge is bound to receive it, that is, allow it to be introduced in evidence”44 Many statutes have rules on the admissibility of documents, with the Indian Evidence Act 187245 being one of them.

45Copy pinpoint45. An agreement can be void without its nature as a void agreement having an impact on whether it may be introduced in evidence. Similarly, an agreement can be valid but inadmissible in evidence. For instance, and may enter into an agreement by which B is restrained from undertaking a particular trade. This agreement would be void under Section 27 of the Contract Act46 but this does not impact its admissibility in evidence should A attempt to enforce it against B. The court will not enforce the agreement between the parties because it is void but the agreement is nonetheless admissible in evidence.

46Copy pinpoint46. When an agreement is void, we are speaking of its enforceability in a court of law. When it is inadmissible, we are referring to whether the court may consider or rely upon it while adjudicating the case. This is the essence of the difference between voidness and admissibility. c. Section 35 of the Stamp Act renders a document inadmissible and not void

47Copy pinpoint47. The majority judgment in N N Global 2 (supra) summed up its holding in the following terms:

44 P Ramanatha Aiyar, The Law Lexicon (Second edition, 1997) 45 “Evidence Act” 46 “27. Agreement in restraint of trade void.— Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Exception 1.—Saving of agreement not to carry on business of which goodwill is sold.—One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein: Provided that such limits appear to the Court reasonable, regard being had to the nature of the business.”

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“109. … An agreement which is unstamped or insufficiently stamped is not enforceable, as long as it remains in the said condition. Such an instrument would be void as being not enforceable [see Section 2(g) of the Contract Act].” The above observation conflates the distinction between enforceability and admissibility.

48Copy pinpoint48. Section 35 of the Stamp Act is unambiguous. It stipulates, “No instrument chargeable with duty shall be admitted in evidence…” The term “admitted in evidence” refers to the admissibility of the instrument. Sub- section (2) of Section 42, too, states that an instrument in respect of which stamp-duty is paid and which is endorsed as such will be “admissible in evidence.” The effect of not paying duty or paying an inadequate amount renders an instrument inadmissible and not void. Non-stamping or improper stamping does not result in the instrument becoming invalid. The Stamp Act does not render such an instrument void. The non-payment of stamp duty is accurately characterised as a curable defect. The Stamp Act itself provides for the manner in which the defect may be cured and sets out a detailed procedure for it. It bears mentioning that there is no procedure by which a void agreement can be “cured.”

49Copy pinpoint49. In Thiruvengadam Pillai v. Navaneethammal,47 this Court noted that the trial court and the High Court had doubted the authenticity of an agreement for the sale of certain immoveable property because it was written on two stamp papers purchased on different dates. This Court held that this by itself would not invalidate the agreement. It noticed the distinction between the legal validity of the agreement and its admissibility: “13. The Stamp Act is a fiscal enactment intended to secure revenue for the State. In the absence of any rule requiring consecutively numbered stamp papers purchased on the same day, being used for an instrument which is not intended to be registered, a document cannot be termed as invalid merely because it is written on two stamp papers purchased by the same person on different dates. Even assuming that use of such stamp papers is an irregularity,

47 (2008) 4 SCC 530

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1121 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

the court can only deem the document to be not properly stamped, but cannot, only on that ground, hold the document to be invalid. Even if an agreement is not executed on requisite stamp paper, it is admissible in evidence on payment of duty and penalty under Sections 35 or 37 of the Stamp Act, 1899. If an agreement executed on a plain paper could be admitted in evidence by paying duty and penalty, there is no reason why an agreement executed on two stamp papers, even assuming that they were defective, cannot be accepted on payment of duty and penalty. But admissibility of a document into evidence and proof of genuineness of such document are different issues.” (emphasis supplied)

50Copy pinpoint50. This has long been the position of law in India with respect to the Stamp Act. In Gulzari Lal Marwari v. Ram Gopal,48 one of the parties contended that the agreement was invalid because it was not properly stamped. The portion of Section 35 which bars the admissibility of unstamped instruments was the same then as it is now. The Calcutta High Court held: “…The effect of the section is to make such an unstamped document inadmissible in evidence, and unable to be acted upon by persons having authority to receive evidence or by any public officer. It does not affect the validity of the document. There is a clear distinction to be drawn between invalidity and inadmissibility of documents. Certain statutes and sections render documents invalid if they are not stamped. No section of the Indian Stamp Act has this effect…” The position of law has also been noticed by the High Courts in other cases including the Andhra Pradesh High Court in Boottam Pitchiah v. Boyapati Koteswara Rao49.

51Copy pinpoint51. In N N Global 2 (supra), this Court held that the failure to stamp an arbitration agreement is not a “curable defect.” Relying on the provisions

48 1936 SCC OnLine Cal 275 49 1964 SCC OnLine AP 5

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of the Contract Act as well as Section 11(6-A) of the Arbitration Act, it held that an unstamped arbitration agreement is void. The relevant paragraphs of the judgment of the majority are extracted below: “103. … It may not be apposite to merely describe an unstamped arbitration agreement as a “curable defect”. As long it remains an unstamped instrument, it cannot be taken notice of for any purpose, as contemplated in Section 35 of the Stamp Act. It remains unenforceable. … It is “not enforceable in law”. In the said sense, it also cannot exist in law. It would be void. Our view in this regard that voidness is conflated to unenforceability receives fortification from Section 2(j) of the Contract Act which renders a contract which ceases to be enforceable void.” (emphasis in original)

52Copy pinpoint52. The above observation of this Court is incorrect. Section 2(j) of the Contract Act provides as follows: “(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.”

53Copy pinpoint53. Section 2(j) is not attracted when an instrument is rendered inadmissible under Section 35 of the Stamp Act. The effect of the latter is not to render an unstamped agreement unenforceable. If it was unenforceable, it would imply that it was void. We have already discussed why an unstamped or inadequately stamped agreement is not void in the preceding paragraphs. Indeed, the approach of the majority in N N Global 2 (supra) to the Contract Act would render unstamped agreements void ab initio and not void.

54Copy pinpoint54. In N N Global 2 (supra), this Court also relied on Section 11(6A) of the Arbitration Act to reach its conclusion: “104. What Section 11(6-A) contemplates is a contract and it is not an agreement which cannot be treated as a contract. This is despite the use of the words “arbitration agreement” in Section 11(6-A). In other words, contract must conform to Section 7 of the Act. It must also, needless to say, fulfil the requirements of the Contract Act.” (emphasis supplied)

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1123 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

55Copy pinpoint55. Section 11(6-A)50 of the Arbitration Act is extracted below: “(6-A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement.” (emphasis supplied)

56Copy pinpoint56. A plain reading of Section 11(6A) makes it evident that it is referring to an arbitration agreement. Section 11(6A) provides that courts must confine themselves to an examination of the existence of the arbitration agreement. The word “confine” indicates the intention of the legislature to limit the jurisdiction of the courts at the stage of the appointment of an arbitrator.

57Copy pinpoint57. In Vidya Drolia (supra), this Court held: “21. The term “agreement” is not defined in the Arbitration Act, albeit it is defined in Section 10 of the Contract Act, 1872 (for short “the Contract Act”), … as contracts made by free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not thereby expressly declared to be void. Section 10 of the Contract Act also stipulates that aforesaid requirements shall not affect any law in force in India (and not expressly repealed) by which a contract is required to be made in writing, in presence of witnesses or any law relating to registration of documents. Thus, an arbitration agreement should satisfy the mandate of Section 10 of the Contract Act, in addition to satisfying other requirements stipulated in Section 7 of the Arbitration Act.”

58Copy pinpoint58. The above observations are correct insofar as the arbitration agreement must satisfy the requirements of the Contract Act. However, the authority empowered to adjudicate whether the requirements of the Contract Act are satisfied is the arbitral tribunal, under Section 16 of the Arbitration Act. This is addressed in greater detail in the following segments.

50 Omitted by Act 33 of 2019. The omission is yet to be notified / take effect.

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iii. The purpose of the Stamp Act

59Copy pinpoint59. The Stamp Act is a fiscal legislation which is intended to raise revenue for the government. It is a mandatory statute. In Hindustan Steel Ltd. v. Dilip Construction Co.,51 this Court dealt with the import of Sections 35, 36 and 42 of the Stamp Act. One of the parties relied on the difference in the phraseology between Sections 35 and 36 to argue that an instrument which was insufficiently stamped or not stamped could be admitted in evidence upon the payment of duty and a penalty (if any) but that it could not be acted upon, once admitted. It was argued that Section 35 operates as a bar in two respects, namely, the admission of an instrument into evidence as well as acting upon that instrument. It was argued that Section 36, in contrast to Section 35, removed the bar in one respect alone – the admissibility of the instrument into evidence. This Court rejected this argument and held that the provisions of the Stamp Act clearly provide that an instrument could be admitted into evidence as well as acted upon once the appropriate duty has been paid and the instrument is endorsed: “6. … The argument ignores the true import of Section 36. By that section an instrument once admitted in evidence shall not be called in question at any stage of the same suit or proceeding on the ground that it has not been duly stamped. Section 36 does not prohibit a challenge against an instrument that it shall not be acted upon because it is not duly stamped, but on that account there is no bar against an instrument not duly stamped being acted upon after payment of the stamp duty and penalty according to the procedure prescribed by the Act. The doubt, if any, is removed by the terms of Section 42(2) which enact, in terms unmistakable, that every instrument endorsed by the Collector under Section 42(1) shall be admissible in evidence and may be acted upon as if it has been duly stamped.” (emphasis in original)

60Copy pinpoint60. In so holding, this Court made a significant observation about the purpose of the Stamp Act and the manner in which it is to be interpreted by courts:

51 (1969) 1 SCC 597

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1125 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

“7. The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments: It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument. Viewed in that light the scheme is clear.” (emphasis supplied) The Stamp Act is a legislation which is enacted in the interest of the revenue. The statute must be interpreted with due regard to its purpose. E*. The Arbitration and Conciliation Act 1996

61Copy pinpoint61. Arbitration is a method of alternative dispute resolution where parties agree to refer their disputes to a neutral third party known as an arbitrator. The aim of arbitration is to provide speedy, efficient, and binding resolution of disputes that have arisen between the parties in regard to their substantive obligations. The thrust of arbitration law is succinctly encapsulated in Redfern and Hunter: “It is to be expeditious where the law is slow, cheap where the law is costly, simple where the law is technical, a peacemaker instead of a stirrer-up of strife.”52

62Copy pinpoint62. Before the enactment of the Arbitration Act, the law on arbitration was contained in the Arbitration Act 1940,53 the Arbitration (Protocol and Convention) Act 1937, and Foreign Awards (Recognition and Enforcement) Act 1961. In 1978, the Law Commission of India suggested substantial amendments to the 1940 Act to make it more responsive to the contemporary legal and economic requirements. In the meanwhile, the United Nations Commission on International Trade Law54 adopted the Model Law in 1985 to foster the development of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial arbitration.

* Ed. Note: PART E 52 Redfern and Hunter on International Arbitration (7th edn, Oxford University Press, 2023) 3. 53 “1940 Act” 54 “UNCITRAL”

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