A five-judge bench of the Supreme Court of India has in N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited & Others held by a 3:2 majority that an arbitration clause contained in an instrument that is not duly stamped is non-existent in law until such agreement is validated by payment of the requisite stamp duty following the procedure laid down under the relevant legislation for payment of stamp duty, particularly the Indian Stamp Act, 1899. The minority was of the view that non-payment of stamp duty on an agreement liable to stamp duty, being a curable defect, would not render the arbitration clause contained within such agreement to be void.
The following are the key takeaways from the decision. First, if an arbitration agreement (either standalone or contained as a provision in a contract) is found to be unstamped, it would be impounded immediately and returned only upon payment of the requisite stamp duty and penalty. Second, if such arbitration agreement is insufficiently stamped and the deficit in stamp duty is nominal, parties may undertake a self-assessment and pay the deficit stamp duty and penalty. Should parties not be able to self-assess the deficit in stamp duty, they are required to formally submit the agreement for adjudication with the relevant authority. Third, the judgment expressly notes that it does not comment on Section 9 of the Arbitration Act and Conciliation Act, 1996, as amended, in relation to application by parties to the courts for interim reliefs.

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