Reportable

2023 INSC 1066

IN THE SUPREME COURT OF INDIA

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

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER

THE ARBITRATION AND CONCILIATION ACT 1996 AND THE
INDIAN STAMP ACT 1899

And With
Arbitration Petition No. 25 of 2023

Signature Not Verified

Digitally signed by
Sanjay Kumar
Date: 2023.12.13
13:39:40 IST
Reason:

1
 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

2
 e. United States of America .............................................................................................................. 61

f. Singapore ..................................................................................................................................... 62

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

J. SMS Tea Estates and Garware Wall Ropes were wrongly decided.................. 115

i. SMS Tea Estates.......................................................................................................... 115

ii. Garware Wall Ropes.................................................................................................... 119

3
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

4
 PART A

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 1899 2, 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 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

1 “Arbitration Act”
2 “Stamp Act”
3 “Contract Act”
4 (2021) 4 SCC 379

5
 PART A

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)

Ltd 5 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 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

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

6
 PART A

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 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.

7 (2021) 2 SCC 1

7
 PART A

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, 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.

8 (2023) 7 SCC 1

8
 PART A

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, must be left

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

9
 PART A

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

Brothers 9 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.

9 (2020) 4 SCC 612

10 Review Petition (Civil) No. 704/2021 in CA No. 1599/2020.

10
 PART A

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 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.”

9. 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:

11Arbitration Petition No. 25 of 2023

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

11
 PART B

“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.”

10. 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) 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

11. 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.

12. 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;

12
 PART B

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.

13. 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.

13
 PART B

14. 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;

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

14
 PART B

necessarily includes an arbitral tribunal which is constituted by the consent

of parties through an arbitration agreement.

15. 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.

16. 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

15
 PART B

of protection in both domestic as well as international arbitrations seated in

India; and

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.

17. 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.

18. 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

13 (2002) 4 SCC 388

16
 PART B

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.

19. 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 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).

20. 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.

21. Ms Madhavi Divan, Mr Prashanto Chandra Sen, Mr Arvind Varma, Mr

Ramesh Singh, Mr K Ramakant Reddy, Mr Rahul G. Tanwani, Mr Abir

17
 PART C

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

22. 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 (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.

23. 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

14 Bharat Petroleum Corporation v. Mumbai Shramik Sangha, (2001) 4 SCC 448

18
 PART C

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

24. 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.

25. 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

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

19
 PART C

an arbitrator at Section 11 stage when the underlying contract is unstamped

or insufficiently stamped. The Bench directed the 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.

26. 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.

19 (2020) 9 SCC 121

20
 PART C

27. 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 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].”

28. 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

20 (1980) 1 SCC 223

21
 PART D

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

29. 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;

(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”

30. The term “instrument” is defined broadly, in an inclusive sense. It includes

electronic documents. Schedule I to the Stamp Act contains descriptions of

22
 PART D

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;

(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.”

23
 PART D

31. 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.

32. Sections 13 and 14 indicate the mode of stamping. In terms of Section 13,

every instrument written upon paper stamped with an impressed 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

24
 PART D

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

33. 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

25
 PART D

34. 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.

35. 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.

36. 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

35 Section 31(1), Stamp Act

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

26
 PART D

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.

ii. The consequences of the failure to stamp an instrument

a. The procedure under the Stamp Act

37. 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

27
 PART D

d. The instrument may be written in contravention of Sections 13 and 14,

and thereby deemed to be unstamped in terms of Section 15.

38. 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:

“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);

28
 PART D

(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.”

39. 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 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

29
 PART D

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 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.

40. 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

39 Subject to the proviso to Section 35.

30
 PART D

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.”

41. 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

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

42. 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

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

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

31
 PART D

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.

43. 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

44. 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:

“Admissible

32
 PART D

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 1872 45 being one of them.

45. 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, A and B 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.

46. 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.

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.”

33
 PART D

c. Section 35 of the Stamp Act renders a document inadmissible and not

void

47. The majority judgment in N N Global 2 (supra) summed up its holding in the

following terms:

“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.

48. 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.”

34
 PART D

49. 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, 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)

50. 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

47 (2008) 4 SCC 530

48 1936 SCC OnLine Cal 275

35
 PART D

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 Rao 49.

51. 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 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)

49 1964 SCC OnLine AP 5

36
 PART D

52. 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.”

53. 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.

54. 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)

55. 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)

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

37
 PART D

56. 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.

57. 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.”

58. 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.

iii. The purpose of the Stamp Act

59. 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

51 (1969) 1 SCC 597

38
 PART D

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)

60. 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:

39
 PART E

“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

61. 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

62. 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

52 Redfern and Hunter on International Arbitration (7th edn, Oxford University Press, 2023) 3.
53 “1940 Act”

40
 PART E

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. The

General Assembly of the United Nations recommended to all states to give

due consideration to the Model Law in view of the desirability of achieving

uniformity of the law of arbitral procedure and the specific needs of

international commercial arbitration practice. 55

63. The Arbitration Act was enacted to “consolidate and amend the law relating

to domestic arbitration, international commercial arbitration and enforcement

of foreign arbitral awards as also to define the law relating to the conciliation

and for matters connected therewith or incidental thereto.” In the process, the

Arbitration Act repealed the 1940 Act, the Arbitration (Protocol and

Convention) Act 1937, and the Foreign Awards (Recognition and

Enforcement) Act 1961. It also brought domestic as well as international

commercial arbitration in consonance with the Model Law, the New York

Convention, and the Geneva Convention. The Arbitration Act is divided into

four parts: (i) Part I deals with domestic and international arbitration that takes

place in India; (ii) Part II deals with the enforcement of foreign arbitral awards

under the New York Convention and the Geneva Convention; (iii) Part III deals

with conciliation; and (iv) Part IV contains supplementary provisions. In the

54“UNCITRAL”
55General Assembly of the United Nations, ‘Model Law on International Commercial Arbitration of the United
Nations Commission on International Trade Law’ 40/72 112th Plenary Session, 11 December 1985.

41
 PART E

present reference, we are largely concerned with Part I of the Arbitration Act.

The important principles which animate the law on arbitration as indeed the

Arbitration Act are discussed in the following segment. These principles act

as important aids to interpret the Arbitration Act.

i. Arbitral autonomy

64. In medieval England, recourse to arbitration was commonplace among

merchants and traders. During the seventeenth and the eighteenth century,

settlement of commercial disputes by arbitration was encouraged by both

Chancery and the courts. 56 In light of the widespread use of arbitration,

coupled with a rapid decline in court litigation, the English courts began to

actively discourage arbitration as a dispute resolution mechanism. 57 Judicial

scepticism towards arbitration proceedings mainly stemmed from the attitude

of judges that “every activity that occurred within a jurisdiction should be within

the purview of state law and court.” 58

65. As cross-border commerce and transactions proliferated, companies and

businesses sought different ways to resolve their commercial disputes. The

formality, customs, and legal traditions of national courts were at variance with

the intention of the parties to achieve a speedy and efficient resolution of their

disputes. The internationalization of trade and commerce in the middle of the

nineteenth century necessitated the regulation and institutionalization of

arbitration. In the process, arbitration was also detached from the national

56 Henry Horwitz and James Oldham, ‘John Locke, John Mansfield, and Arbitration during the Eighteenth Century’
(1993) 36(1) The Historical Journal 137, 139.
57 Earl Wolaver, ‘The Historical Background of Commercial Arbitration’ (1934) 83 University of Pennsylvania Law

Review 132, 142.

58 Julian D M Lew, ‘Achieving the Dream: Autonomous Arbitration’ (2006) 22(2) Arbitration International 179, 183.

42
 PART E

legal systems, with the growth of arbitral institutions such as the London

Chamber of Arbitration and International Chamber of Commerce. This new

regime of arbitration law paved the way for greater recognition of the mutual

intention of parties and the authority of arbitral tribunals to resolve disputes

without being bogged down by the intricacies of national legal systems. This

was commended and reflected in various international instruments such as

the New York Convention and the UNCITRAL Model Law. Accordingly,

national laws were changed to reflect the principle of judicial non-interference

in arbitration proceedings. The demands of commerce and business

efficiency meant that control by national courts became subordinate to the

intention of the parties and the authority of the arbitral tribunal.59

66. 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.” 60

67. The principle of judicial non-interference reflects the autonomy of arbitral

tribunals. Arbitral tribunals are autonomous in the sense that they are

constituted to give effect to the mutual intention of the parties to settle their

disputes through a neutral and expert authority of their choice. Moreover, the

59 Ibid, at 185
60 Redfern and Hunter on International Arbitration (7th edn, Oxford University Press, 2023) 388

43
 PART E

competence of an arbitral tribunal to rule on its own jurisdiction, including

ruling on any objections with respect to the existence or validity of the

arbitration agreement, also indicates that the arbitral tribunal enjoys sufficient

autonomy from the national courts.

68. Section 9 of the Code of Civil Procedure 1908 provides that the courts shall

have jurisdiction to try all suits of a civil nature excepting suits of which

cognizance is either expressly or impliedly barred. Section 28 of the Contract

Act states that agreements that restrict a party to a contract absolutely from

enforcing their rights under or in respect of any contract by way of usual legal

proceedings are void. However, the provision expressly saves contracts by

which two or more persons agree to refer to arbitration any dispute which may

arise between them in respect of any subject or class of subjects. By choosing

to settle their disputes through arbitration, parties surrender their right to

litigate before the national courts in favour of the arbitral tribunal. By

surrendering their right to litigate in national courts, parties also surrender

their right to be bound by national procedural laws in favour of expedition,

informality, and efficiency of the arbitral process. The arbitral tribunal is not

subject to the procedural laws of a country. For instance, Section 19 of the

Arbitration Act expressly provides that the arbitral tribunal shall not be bound

by the Code of Civil Procedure 1908 or the Indian Evidence Act 1872.

Moreover, it stipulates that an arbitral tribunal may conduct the proceedings

in any manner it deems appropriate if the parties fail to agree on the

procedure to be followed by the tribunal. Although arbitral tribunals have

autonomy in the procedural and substantive sense, they are not completely

44
 PART E

independent of the law of the country in which the arbitral tribunal has its

juridical seat, as discussed in the following segments.

ii. Principle of minimum judicial interference

69. The principle of judicial non-interference in arbitral proceedings is

fundamental to both domestic as well as international commercial arbitration.

The principle entails that the arbitral proceedings are carried out pursuant to

the agreement of the parties or under the direction of the tribunal without

unnecessary interference by the national courts. 61 This principle 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. 62 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, including the New York Convention 63 and the Model Law.

70. Article 5 of the Model Law deals with the extent of court intervention. It states

that “[i]n matters governed by this Law, no court shall intervene except where

so provided in this Law.” The drafters of the Model Law deemed it important

to incorporate this article to provide “certainty to the parties and the arbitrators

about the instances in which court supervision or assistance was to be

expected.” 64 By including the introductory words “in matters governed by this

61 Gary Born, The Principle of Judicial Non-Interference in International Arbitration Proceedings’ (2009) 30
University of Pennsylvania Journal of International Law 999, 1002.
62 Gary Born, International Arbitration Law and Practice (3rd ed, 2021) 2361
63 Article II(3), New York Convention
64 Report of the Working Group on International Contract Practices on the work of its seventh session, A/CN.9/246

(New York, 23 January-3 February 1984) 45.

45
 PART E

law”, the scope of the provision was limited only to matters which were

governed by or regulated in the Model Law. The purpose was to ensure that

no judicial authority assigns to itself the power that has been expressly and

exclusively bestowed upon the arbitral tribunal. For instance, Article 16 of the

Model Law confers upon the arbitral tribunal an exclusive power to rule on its

jurisdiction including dealing with objections pertaining to the existence and

validity of an arbitration agreement.

71. The Model Law does not regulate or govern all matters related to international

commercial arbitration as well as the arbitral process. 65 Similarly, Article 5

does not bar the national courts from intervening in matters not governed by

the Model Law. 66 The UNCITRAL Working Group itself identified certain

situations not dealt with under the Model Law where the national courts could

intervene:

“Article 5 would, for example, not exclude court control or

assistance in those matters which the Working Group had
decided not to deal with in the law (e.g., capacity of parties to
conclude arbitration agreement; impact of state immunity;
competence of arbitral tribunal to adapt contracts;
enforcement by courts of interim measures of protection
ordered by arbitral tribunal; fixing of fees or request for
deposit, including security for fees or costs; time-limit for
enforcement of awards).”

72. This indicates that Article 5 of the Model Law emphasizes on arbitral tribunal

being the first instance to determine all issues relating to matters of law or

construction as well as issues of jurisdiction and scope of authority. 67 It

65 Manuel A Gomez, ‘Article 5: Extent of Court Intervention’ in Ilias Bantekas (eds) UNCITRAL Model Law on

International Commercial Arbitration: A Commentary 89 (2020)

66 Digest of Case Law on the Model Law on International Commercial Arbitration (2012) 21
67 Rio Algam v. Sammi Steel Co., Ontario Court of Justice, Canada, 1 March 1991, [1991] O.J. No. 268

46
 PART E

exclusively determines the manner and form of judicial intervention in the

arbitration process. National courts can intervene with respect to matters not

expressly governed by the Model Law. 68

73. Section 5 of the Arbitration Act is based on Article 5 of the Model Law.

However, Section 5 also incorporates a non-obstante clause setting out the

scope of judicial intervention. It reads as follows:

“5. Extent of judicial intervention.- Notwithstanding anything

contained in any other law for the time being in force, in
matters governed by this Part, no judicial authority shall
intervene except where so provided in this Part.”

Two aspects become clear from a comparison of Section 5 of the Arbitration

Act with Article 5 of the Model Law: first, Section 5 begins with a non-obstante

clause unlike Article 5; and second, it limits the scope of judicial intervention

to the extent “so provided” in Part I.

74. One of the main objectives of the Arbitration Act is to minimize the supervisory

role of courts in the arbitral process. Party autonomy and settlement of

disputes by an arbitral tribunal are the hallmarks of arbitration law. Section 5

gives effect to the true intention of the parties to have their disputes resolved

through arbitration in a quick, efficient, and effective manner by minimizing

judicial interference in the arbitral proceedings. 69 Parliament enacted Section

5 to minimize the supervisory role of courts in the arbitral process to the bare

minimum, and only to the extent “so provided” under the Part I of Arbitration

68 Richard Garnett, ‘Article 5 of the Model Law: Protector of the Arbitral Process?’ (2021) 38(2) Journal of
International Arbitration 127-146.
69 Food Corporation of India v. Indian Council of Arbitration, (2003) 6 SCC 564

47
 PART E

Act. In doing so, the legislature did not altogether exclude the role of courts

or judicial authorities in arbitral proceedings, but limited it to circumstances

where the support of judicial authorities is required for the successful

implementation and enforcement of the arbitral process.70 The Arbitration Act

envisages the role of courts to “support arbitration process” 71 by providing

necessary aid and assistance when required by law in certain situations.

75. Section 5 begins with the expression “notwithstanding anything contained in

any other law for the time being in force.” The non-obstante clause is

Parliament’s addition to the Article 5 of the Model Law. It is of a wide amplitude

and sets forth the legislative intent of limiting judicial intervention during the

arbitral process. In the context of Section 5, this means that the provisions

contained in Part I of the Arbitration Act ought to be given full effect and

operation irrespective of any other law for the time being in force. It is now an

established proposition of law that the legislature uses non-obstante clauses

to remove all obstructions which might arise out of the provisions of any other

law, which stand in the way of the operation of the legislation which

incorporates the non-obstante clause. 72

76. A non-obstante clause is appended in a provision to give such provision

overriding effect over other provisions of the law. 73 In Chandavarkar Sita

70 Union of India v. Popular Construction Co., (2001) 8 SCC 470; P Anand Gajapathi Raju v. P.V.G. Raju,

(2000) 4 SCC 539

71 Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677
72 State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh, (2005) 9 SCC 129
73 Owners and Parties Interested in the Vessel M.V. Polaris Galaxy v. Banque Cantonale De Geneva, 2022

SCC OnLine SC 1293

48
 PART E

Ratna Rao v. Ashalata S. Guram, 74 Justice Sabyasachi Mukharji explained

the purport of non-obstante clause in the following terms:

“67. A clause beginning with the expression “notwithstanding

anything contained in this Act or in some particular provision
in the Act or in some particular Act or in any law for the time
being in force, or in any contract” is more often than not
appended to a section in the beginning with a view to give the
enacting part of the section in case of conflict an overriding
effect over the provision of the act or the contract mentioned
in the non obstante clause. It is equivalent to saying that in
spite of the provisions of the Act or any other Act mentioned
in the non obstante clause or any contract or document
mentioned the enactment following it will have its full
operation or that the provisions embraced in the non obstante
clause would not be an impediment for an operation of the
enactment.”

77. Although a non-obstante clause must be allowed to operate with full vigour,

its effect is limited to the extent intended by the legislature. In ICICI Bank Ltd

v. SIDCO Leathers Ltd, 75 a two-Judge Bench of this Court held that a non-

obstante clause must be interpreted by confining it to the legislative policy.

Thus, even if a non-obstante clause has wide amplitude, the extent of its

impact has to be measured in view of the legislative intention and legislative

policy. 76 In view of this settled legal position, the issue that arises for our

consideration is the scope of the non-obstante clause contained in Section 5

of the Arbitration Act.

78. In Morgan Securities & Credit (P) Ltd. v. Modi Rubber Ltd., 77 the issue

before the two-Judge Bench was whether the provisions of the Arbitration Act

74 (1986) 4 SCC 447

75 (2006) 10 SCC 452
76 JIK Industries Ltd. v. Amarlal V. Jumani, (2012) 3 SCC 255
77 (2006) 12 SCC 642

49
 PART E

would prevail over the provisions of the Sick Industrial Companies (Special

Provisions) Act, 1985. 78 While noting the non-obstante clause contained in

Section 5 of the Arbitration Act, this Court held that the non-obstante clause

has “limited application aiming at the extent of judicial intervention.” It was

held that the Arbitration Act would not prevail over SICA since the latter

enactment seeks to “achieve a higher goal.” In other words, the scope of the

non-obstante clause is limited to prohibiting the intervention of judicial

authorities, unless it has been expressly provided for under Part I of the

Arbitration Act.

79. Similar to Article 5 of the Model Law, Section 5 uses the expression “in matters

governed by this Part.” The use of this expression circumscribes the scope of

judicial intervention to matters expressly governed by Part I of the Arbitration

Act. The matters governed by Part I inter alia include (i) Section 8 which

mandates judicial authorities to refer parties to arbitration when prima facie

there is a valid arbitration agreement; (ii) Section 9 which allows courts to

issue interim measures on an application made by a party to an arbitration

agreement; (iii) Section 11 which empowers the Supreme Court or the High

Courts to appoint arbitrators on an application made by parties to an

arbitration agreement; (iv) Section 27 which allows the arbitral tribunal to

request the court for assistance in taking evidence; and (v) Section 34 which

empowers the court to set aside an arbitral award on the basis of the limited

grounds mentioned therein.

78 “SICA”

50
 PART E

80. Section 5 has two facets – positive and negative. The positive facet vests

judicial authorities with jurisdiction over arbitral proceedings in matters

expressly allowed in or dealt with under Part I of the Arbitration Act. The flip

side to this approach is that judicial authorities are prohibited from intervening

in arbitral proceedings in situations where the arbitral tribunal has been

bestowed with exclusive jurisdiction. This is the negative facet of Section 5.

The non-obstante clause limits the extent of judicial intervention in respect of

matters expressly provided under the Arbitration Act. 79 In Bhaven

Construction v. Sardar Sarovar Narmada Nigam Ltd, 80 a Bench of three

Judges of this Court observed that the “non-obstante clause is provided to

uphold the intention of the legislature as provided in the Preamble to adopt

UNCITRAL Model Law and Rules, to reduce excessive judicial interference

which is not contemplated under the Arbitration Act.”

81. One of the main objectives behind the enactment of the Arbitration Act was to

minimize the supervisory role of courts in the arbitral process by confining it

only to the circumstances stipulated by the legislature. For instance, Section

16 of the Arbitration Act provides that the arbitral tribunal may rule on its own

jurisdiction “including ruling on any objection with respect to the existence or

validity of the arbitration agreement.” The effect of Section 16, bearing in view

the principle of minimum judicial interference, is that judicial authorities cannot

intervene in matters dealing with the jurisdiction of the arbitral tribunal.

Although Sections 8 and 11 allow courts to refer parties to arbitration or

79 Secur Industries Ltd v. Godrej & Boyce Mfg. Co. Ltd, (2004) 3 SCC 447
80 (2022) 1 SCC 75

51
 PART E

appoint arbitrators, Section 5 limits the courts from dealing with substantive

objections pertaining to the existence and validity of arbitration agreements

at the referral or appointment stage. A referral court at Section 8 or Section

11 stage can only enter into a prima facie determination. The legislative

mandate of prima facie determination ensures that the referral courts do not

trammel the arbitral tribunal’s authority to rule on its own jurisdiction.

82. Section 5 is of aid in interpreting the extent of judicial interference under

Sections 8 and 11 of the Arbitration Act. Section 5 contains a general rule of

judicial non-interference. Therefore, every provision of the Arbitration Act

ought to be construed in view of Section 5 to give true effect to the legislative

intention of minimal judicial intervention.

iii. The Arbitration Act is a self-contained code

83. In Girnar Traders v. State of Maharashtra, 81 a Constitution Bench of this

Court observed that a self-contained code is a complete legislation with

regard to the purpose for which it is enacted. Such a self-contained code

provides for a complete machinery to deal with the purpose sought to be

achieved by that law and its dependence on other legislations is either absent

or minimal.

84. A two-Judge Bench of this Court, in Fuerst Day Lawson Ltd. v. Jindal

Exports Ltd,82 explained the nature of the Arbitration Act in the following

terms:

“89. It is, thus, to be seen that Arbitration Act, 1940, from its
inception and right through to 2004 (in P.S. Sathappan [(2004)

81 (2011) 3 SCC 1
82 (2011) 8 SCC 333

52
 PART E

11 SCC 672]) was held to be a self-contained code. Now, if

the Arbitration Act, 1940 was held to be a self-contained code,
on matters pertaining to arbitration, the Arbitration and
Conciliation Act, 1996, which consolidates, amends and
designs the law relating to arbitration to bring it, as much as
possible, in harmony with the UNCITRAL Model must be held
only to be more so. Once it is held that the Arbitration Act is a
self-contained code and exhaustive, then it must also be held,
using the lucid expression of Tulzapurkar, J., that it carries
with it “a negative import that only such acts as are mentioned
in the Act are permissible to be done and acts or things not
mentioned therein are not permissible to be done”. In other
words, a letters patent appeal would be excluded by the
application of one of the general principles that where the
special Act sets out a self-contained code the applicability of
the general law procedure would be impliedly excluded.”

85. The Arbitration Act is a self-contained code inter alia with respect to matters

dealing with appointment of arbitrators, commencement of arbitration, making

of an award and challenges to the arbitral award, as well as execution of such

awards. 83 When a self-contained code sets out a procedure, the applicability

of a general legal procedure would be impliedly excluded. 84 Being a self-

contained and exhaustive code on arbitration law, the Arbitration Act carries

the imperative that what is permissible under the law ought to be performed

only in the manner indicated, and not otherwise. Accordingly, matters

governed by the Arbitration Act such as the arbitration agreement,

appointment of arbitrators and competence of the arbitral tribunal to rule on

its jurisdiction have to be assessed in the manner specified under the law.

The corollary is that it is not permissible to do what is not mentioned under

83 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

84 Subal Paul v. Malina Paul, (2003) 10 SCC 361

53
 PART E

the Arbitration Act. Therefore, provisions of other statutes cannot interfere

with the working of the Arbitration Act, unless specified otherwise.

iv. Principles of modern arbitration

86. The Stamp Act and the Indian Arbitration Act, 1899 came into force on the

same day, that is, 1 July 1899. The Arbitration Act, 1899, which was enacted

more than a century ago, did not have minimum judicial interference as its

avowed object. However, the law on arbitration has undergone a sea change

over the course of a century.

87. The Arbitration Act represents the principles of modern arbitration, which

seeks to give effect to the mutual intention of the parties to resolve their

disputes by a neutral third-party arbitral tribunal, whose decision is final and

binding on all the parties. Arbitration law allows the parties to design arbitral

procedures, which ensures efficiency and expediency of the arbitration

process. One of the reasons that business and commercial entities prefer

arbitration is because it obviates cumbersome judicial processes, which can

often prove expensive, complex, and interminable. Most legal jurisdictions

have also recognized and adopted legal approaches that favor arbitration at

both the domestic and international level. In the process, national courts have

given effect to principles such as the separability presumption and

jurisdictional competence of the arbitral tribunal. Modern arbitration law does

not completely restrict the role of national courts in the arbitration process,

but gives priority to the arbitral tribunal to decide on disputes and issues

pertaining to arbitration agreements as well as the substantive rights of the

parties. The Arbitration Act reflects these aspects of modern arbitration law. It

54
 PART F

is the duty of this Court to interpret the Arbitration Act in a manner which gives

life to the principles of modern arbitration in India.

F. The law on the arbitration agreement

88. An arbitration agreement is the foundation of arbitration as it records the

consent of the parties to submit their disputes to arbitration. 85 In Bihar State

Mineral Development Corporation v. Encon Builders,86 this Court enlisted

the essential elements of an arbitration agreement as follows:

a. There must be a present or future difference in connection with some

contemplated affair;

b. There must be the intention of the parties to settle such disputes by a

private tribunal;

c. The parties must agree in writing to be bound by the decision of such

tribunal; and

d. The parties must be ad idem.

89. Section 2(b) of the Arbitration Act defines an “arbitration agreement” to mean

an agreement referred to in Section 7. Section 7 defines an “arbitration

agreement” to mean an agreement by the parties to submit to arbitration all

or certain disputes which have arisen or which may arise between them in

respect of a defined legal relationship, whether contractual or not. It provides

that an arbitration agreement could be in the form of an arbitration clause in

a contract or in the form of a separate agreement. Further, Section 7

85 Redfern and Hunter on International Arbitration (7th edn, Oxford University Press, 2023) 49
86 (2003) 7 SCC 418

55
 PART F

mandates that an arbitration agreement shall be in writing. According to

Section 7(4), an arbitration agreement is in writing if it is contained in: (a) a

document signed by the parties; (b) an exchange of letters, telex, telegrams

or other means of telecommunication including communication through

electronic means which provide a record of the agreement; or (c) an exchange

of statements of claim and defence in which the existence of the agreement

is alleged by one party and not denied by the other. Section 7(5) provides that

a reference in a contract to a document containing an arbitration clause

constitutes an arbitration agreement if the contract is in writing and the

reference is such as to make that arbitration clause part of the contract.

i. Separability of the arbitration agreement

90. The concept of separability or severability of an arbitration agreement from

the underlying contract is a legal fiction which acknowledges the separate

nature of an arbitration agreement. The separate nature of the arbitration

agreement from the underlying contract is one of the cornerstones of

arbitration law. As Redfern and Hunter explain, an arbitration agreement is

juridically independent from the underlying contract in which it is contained. 87

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,

87 Redfern and Hunter on International Arbitration (7th edn, Oxford University Press, 2023) 81

56
 PART F

the most important being that an arbitration agreement survives the invalidity

or termination of the underlying contract.

91. Schwebel, Sobota and Manton explain in a book on International Arbitration

that the separability presumption 88 is based on four factors: first, the intention

of the parties to require arbitration of any dispute arising between them,

including disputes over the validity of the contract; second, preventing an

unwilling party from avoiding its earlier commitment by alleging the invalidity

of the underlying contract; third, since the arbitration agreement and the

underlying contract are considered as two separate agreements, the

insufficiency in fulfilling formalities in the underlying contract would not result

in the invalidity of the arbitration agreement; and fourth, if the separability

presumption is discarded, courts will have to rule on the merits of the disputes

instead of the arbitral tribunals.

92. The rationale for the separability presumption lies in the contractual freedom

of the parties to an arbitration agreement to settle their disputes by

proceedings before an arbitral tribunal to the exclusion of courts. According

to the common grain of business understanding and expectation, the parties

intend all their disputes over substantive rights and obligations under the

underlying contract to be resolved by the arbitral tribunal.89 Therefore, the

separability presumption ensures that an arbitration agreement survives a

termination, repudiation, or frustration of a contract to give effect to the true

intention of the parties and ensure sanctity of the arbitral proceedings.

88 Stephen Schwebel, Luke Sobota, and Ryan Manton, International Arbitration: Three Salient Problems

(Cambridge University Press, 2nd edn, 2020) 4.

89 Mulheim Pipecoatings GmbH v. Welspun Fintrade Ltd., 2013 SCC OnLine Bom 1048

57
 PART F

93. Switzerland was one of the first jurisdictions to recognize the separability

presumption. In a decision rendered by the Swiss Federal Tribunal in 1933, it

was observed that “[e]ven where the arbitration clause is contained in the

same document as the substantive contract to which it relates and therefore

from the outside appears as a part of the main agreement, it still does not

constitute a single provision of the main agreement but an independent

agreement of a special nature.”90 However, Gary Born points out that although

an arbitration agreement could be separated from the underlying contract, it

can never be independent or autonomous from such contract. 91 This is largely

due to the fact that in certain situations, the defects in the underlying contract

could also invalidate the arbitration agreement.

94. To properly understand the contours of the separability presumption, it is

necessary to understand its origin and development in the international

context. Such an analysis is important because any ruling by this Court on

the separability presumption ought to be with the aid of international best

practices.

d. United Kingdom

95. The separability presumption developed gradually in English law starting with

the decision of the House of Lords in Heyman v. Darwins. 92 The issue before

the House of Lords was whether an arbitration agreement contained in an

underlying contract could survive the termination of such contract for a

repudiatory breach. It was held that an arbitration agreement is collateral to

90 Judgment of 7 October 1933, Tobler v. Justizkommission des Kantons Schwyz, DFT 59 | 177 (1933)
91 Gary Born (n 62) 377
92 [1942] AC 356

58
 PART F

the substantive contract and could survive its termination. Lord Macmillan

observed that an arbitration agreement is materially different from other

ordinary contracts, the reason being that breach of obligations under ordinary

contracts cannot (in general) be specifically enforced and breach of them

results only in damages, but an arbitration agreement can be specifically

enforced by the machinery of the arbitration Acts. Lord Macmillan concluded

that repudiation or breach of a contract does not extinguish the arbitration

agreement, because it survives for the purpose of resolving the outstanding

claims arising out of the breach:

“I am, accordingly, of the opinion that what is commonly called

repudiation or total breach of a contract, whether acquiesced
in by the other party or not, does not abrogate the contract,
though it may relieve the injured party of the duty of further
fulfilling the obligations which he has by the contract
undertaken to the repudiating party. The contract is not put out
of existence, though all further performance of the obligations
undertaken by each party in favour of the other may cease. It
survives for the purpose of measuring the claims arising out
of the breach, and the arbitration clause survives for
determining the mode of their settlement. The purposes of the
contract have failed, but the arbitration clause is not one of
the purposes of the contract.”

96. In subsequent decisions, the English courts reiterated the separability

presumption. In Harbour Assurance Co. (U.K.) Ltd. v. Kansa General

International Insurance Co. Ltd. 93, the Court of Appeal held that an

arbitration agreement is “a self-contained contract collateral to the containing

contract.” The separability presumption is also enshrined in Section 7 of the

UK Arbitration Act 1996 94 in the following terms:

93 [1993] Q.B. 701

94 “UK Arbitration Act”

59
 PART F

“Unless otherwise agreed by the parties, an arbitration

agreement which forms or was intended to form part of
another agreement (whether or not in writing) shall not be
regarded as invalid, non-existent or ineffective because that
other agreement is invalid, or did not come into existence or
has become ineffective, and it shall for that purpose be treated
as a distinct agreement.”

97. Chitty on Contracts states that Section 7 of the UK Arbitration Act maintains

the established common law principle which treats an arbitration agreement

as distinct from the contract of which it forms part.95 According to Chitty,

treating an arbitration agreement distinct and separate from the underlying

contract has two consequences: first, an arbitration agreement can be void or

voidable only on the grounds which directly relate to it; and second, if the

arbitration agreement is valid and binding and is sufficiently wide in its terms,

issues relating to the validity, existence, or effectiveness of the underlying

contract are within the substantive jurisdiction of the arbitral tribunal. 96

98. In Premium Nafta Products Limited v. Fili Shipping Co. Ltd.,97 the House

of Lords further explained the separability presumption in Section 7 of the UK

Arbitration Act. In that case, the issue was whether a party was bound by an

arbitration agreement contained in an underlying contract which was allegedly

procured by fraud and bribery. Lord Hoffman, writing for the House of Lords,

held that it could be enforced in view of the separability presumption. The Law

Lord held that an arbitration agreement in terms of Section 7 of the UK

Arbitration Act is a “distinct agreement” from the underlying contract and,

95 Chitty on Contracts, Hugh Beale (ed), (32nd edn, Sweet and Maxwell, 2015) para 32-028
96 ibid
97 [2007] UKHL 40

60
 PART F

therefore, can be void or voidable only on grounds which relate directly to the

arbitration agreement. Lord Hoffman, built on his past decision in Harbour

Assurance (supra), by holding that Section 7 protects an arbitration

agreement from any indirect challenge.

e. United States of America

99. The US Federal Arbitration Act presupposes that an arbitration agreement

can be separate and distinct from the underlying contract.98 The separability

presumption was subsequently reiterated by US courts with respect to both

international and domestic arbitration. In Prima Paint Corporation v. Flood

& Conklin Mfg. Co.,99 the Supreme Court of the United States affirmed the

separability presumption by observing that “arbitration clauses as a matter of

federal law are ‘separable’ from the contracts in which they are embedded.”

In reaching this conclusion, the court emphasized upon the presumptive

desire of the parties to insulate the arbitration agreement from challenges

directed at the underlying contract. The position of law which was laid down

in Prima Paint (supra) was reiterated by the Supreme Court of the United

States in Buckeye Check Cashing Inc v. Cardegna 100 and Rent-A-Center,

West, Inc. v. Jackson.101 In Rent-A-Center (supra), it was held that

application of the severability rule does not depend on the substance of the

remainder of the contract.

98 Gary Born (n 62) 382

99 388 US 395 (1967)
100 546 U.S. 440, 440 (2006)
101 2 561 U.S. 63 (2010)

61
 PART F

f. Singapore

100. The doctrine of separability has been statutorily recognized under the

domestic arbitration regime in Singapore through Section 21 of the

Singaporean Arbitration Act, 2001. 102 The provision is that “an arbitration

clause which forms part of a contract shall be treated as an agreement

independent of the other terms of the contract.” The separability presumption

has been further explained by the Singapore High Court in BNA v. BNB. The

High Court observed that the “parties intend their arbitration agreement to

remain effective if a provision of the substantive contract into which it is

integrated could, in certain circumstances of fact or law, operate to render

their arbitration agreement invalid.” 103 Thus, the Singapore High Court held

that the purpose of the separability presumption is to insulate an arbitration

agreement from invalidity that may arise from a challenge to the substantive

contract.

g. International Conventions

101. The New York Convention does not expressly provide for the separability

presumption. Article II of the Convention defines an arbitration agreement as

including “an arbitral clause in a contract or an arbitration agreement, signed

by the parties or contained in an exchange of letters or telegrams.” Moreover,

Article V(1)(a) provides that the recognition and enforcement of an arbitral

award may be refused where the arbitration agreement “is not valid under the

law to which the parties have subjected it or, failing any indication thereon,

102 Arbitration Act 2001 (No. 37 of 2001)

103 [2019] SGHC 142

62
 PART F

under the law of the country where the award was made.” The provision rests

on the premise that international arbitration agreements could be subjected

to different national laws and legal rules than the underlying contract, and,

therefore, an arbitration agreement is presumptively separate from the

underlying contract. According to Gary Born, Article II and Article V(1)(a) of

the New York Convention indicate that the Convention treats an arbitration

agreement as being different from the underlying contract. 104

102. Article 16 of the Model Law deals with the competence of an arbitral tribunal

to rule on its own jurisdiction. Article 16(1) provides:

“The arbitral tribunal may rule on its own jurisdiction, including

any objections with respect to the existence or validity of the
arbitration agreement. For that purpose, an arbitration
clause which forms part of a contract shall be treated as
an agreement independent of the other terms of the
contract. A decision by the arbitral tribunal that the
contract is null and void shall entail ipso jure the
invalidity of the arbitration clause.”

(emphasis supplied)

103. Rule 23 of the UNCITRAL Arbitration Rules, 2021 also provides that “an

arbitration clause that forms part of a contract shall be treated as an

agreement independent of the other terms of the contract.” In contrast to the

New York Convention, the Model Law expressly recognizes the separability

presumption.

104. According to the UNCITRAL Working Group, the separability presumption is

incorporated under Article 16(1) to complement the principle of competence-

competence. The separability presumption further ensures that the invalidity

104 Gary Born (n 62) 378

63
 PART F

of the underlying contract does not affect the jurisdiction of the arbitral tribunal

to decide on the nullity of the contract or any other issues submitted to its

jurisdiction by the parties “unless it finds that the defect which causes the

nullity of the contract affects also the arbitration clause itself.” 105 The last

sentence of Article 16(1) (extracted above) states the general principle of

contractual validity of arbitration clauses. 106 It connotes that the invalidity of

the underlying contract will not necessarily entail the invalidity of an arbitration

agreement contained in the contract. Accordingly, the arbitral tribunal’s

jurisdiction will be affected only when the defect causing invalidity is directed

at the arbitration agreement. 107

h. India

105. The Arbitration Act also incorporates the separability presumption in Section

16(1) along the lines of the Model Law. Section 16(1) reads as follows:

“16. Competence of arbitral tribunal to rule on its jurisdiction –

(1) The arbitral tribunal may rule on its own jurisdiction,
including ruling on any objections with respect to the
existence or validity of the arbitration agreement, and for that
purpose, -

(a) an arbitration agreement which forms part of a contract

shall be treated as an agreement independent of the other
terms of the contract; and

(b) a decision by the arbitral tribunal that the contract is null

and void shall not entail ipso jure the invalidity of the
arbitration clause.”

105 Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration, A/CN.9/264 (25
March 1985) 38.
106 Gary Born (n 62) 403
107 Digest of Case Law on the Model Law on International Commercial Arbitration (2012) 76

64
 PART F

106. The separability presumption, as incorporated under Article 16(1) of the

Model Law, as well as Section 16 of the Arbitration Act, is qualified by the

expression “for that purpose.” A plain reading may suggest that Section 16

has incorporated the separability presumption only for the particular purpose

of allocation of competence over jurisdictional disputes. However, the Digest

of Case Laws on UNCITRAL Model Law states that “the language used in the

second sentence does not prevent the application of the separability

presumption when a jurisdictional question is raised before a court.” 108 Gary

Born suggests that the better view is that the separability presumption

contained in Article 16(1) states a general rule of contractual validity “which is

applicable for all purposes.” 109 The judicial view that emerges from the Indian

courts also seems to suggest that an arbitration agreement is treated as

distinct and separate from the underlying contract as a general rule of

substantive validity.

107. The separability presumption has undergone a significant evolution in India.

Initially, the Indian courts viewed an arbitration agreement as an integral part

of the underlying contract without any existence beyond such contract. For

instance, in Union of India v. Kishorilal Gupta, 110 the issue before this Court

was whether an arbitration clause in the original contract survived after the

enactment of a subsequent contract. Justice K Subba Rao (as the learned

Chief Justice then was) considered Heyman (supra) but distinguished it on

the ground that it only dealt with repudiation, where rights and obligations of

108 Ibid.
109 Gary Born (n 62) 403
110 1959 SCC OnLine SC 6

65
 PART F

parties survive the termination of contract. It was held that in situations where

the original contract is superseded by a subsequent contract, the arbitration

clause in the original contract will also cease to exist. Justice K Subba Rao,

speaking for the majority, held that first, an arbitration clause is a collateral

term of a contract as distinguished from its substantive terms, but nonetheless

it is an integral part of it; second, the existence of the underlying contract is a

necessary condition for the operation of an arbitration clause; third, if the

underlying contract was non-est in the sense that it never came legally into

existence or was void-ab-initio, the arbitration clause also cannot operate;

fourth, if the parties put an end to a validly executed contract and substitute it

with a new contract, the arbitration clause of the original contract also

perishes with it; and fifth, in situations such as repudiation, frustration, or

breach of contract, only the performance of the contract comes to an end, the

arbitration clause persists because the contract continues to exist for the

purposes of disputes arising under it.

108. In Damodar Valley Corporation v. K K Kar, 111 a two-Judge Bench of this

Court held that the plea that a contract is void, illegal, or fraudulent affects the

entire contract along with the arbitration clause. However, the enactment of

the Arbitration Act in 1996 enabled the Indian courts to give effect to the

separability presumption with greater impetus. Section 16(1)(b), which

provides that a decision by the arbitral tribunal that the contract is null and

void shall not entail ipso jure the invalidity of the arbitration clause, renders

the decisions in Kishorilal Gupta (supra) and Damodar Valley Corporation

111 (1974) 1 SCC 141

66
 PART F

(supra) redundant. Consequently, even if the underlying contract is declared

null and void, it will not ipso jure result in the invalidity of the arbitration

agreement.

109. In Firm Ashok Traders v. Gurumukh Das Saluja, 112 the issue before this

Court was whether an application under Section 9 of the Arbitration Act moved

by a partner of a non-registered firm or by a person not shown as a partner in

the Register of Firms was maintainable in view of Section 69(3) of the Indian

Partnership Act, 1932. Section 69(3) creates a bar against the institution of a

suit to enforce a right arising from a contract unless the firm is registered and

the person suing is or has been shown in the Register of Firms as partner.

This Court considered the overall scheme of the Arbitration Act to hold that an

“arbitration clause is separable from the other clauses of the partnership

deed” and “constitutes an agreement by itself.”

110. In National Agricultural Coop. Marketing Federation India Ltd. v. Gains

Trading Co., 113 the issue before this Court in an application under Section 11

was whether an arbitration clause comes to an end if the contract containing

such clause is repudiated. While answering this in negative, this Court

observed that even if the underlying contract comes to an end, the arbitration

agreement contained in such contract survives for the purpose of the

resolution of disputes between the parties. Similarly, in P Manohar Reddy &

Bros. v. Maharashtra Krishna Valley Development Corp.,114 this Court

referred to Buckeye Check Cashing Inc. (supra) to observe that an

112 (2004) 3 SCC 155

113 (2007) 5 SCC 692
114 (2009) 2 SCC 494

67
 PART F

arbitration agreement contained in an underlying contract is a collateral term

which may survive the termination of the contract.

111. In Magma Leasing & Finance Ltd. v. Potluri Madhavilata,115 this Court cited

Heyman (supra) with approval to hold that the termination of the underlying

contract does not render an arbitration agreement inoperative. It was further

observed that the arbitration agreement survives for the purpose of resolution

of disputes arising “in respect of”, “with regard to”, or “under” the underlying

contract. The emphasis on the expressions “in respect of”, “with regard to” or

“under” in Magma Leasing & Finance Ltd. (supra) indicates that the purpose

of an arbitration agreement is to embody the mutual intention of the parties to

settle any disputes that may arise “in respect of” the substantive obligations

under the underlying contract. It is, therefore, a logical conclusion that the

parties mutually intend to make an arbitration agreement distinct and

separate from the underlying contract, so that even if the underlying contract

comes to an end, the arbitration agreement survives to resolve any

outstanding disputes that may arise out the substantive obligations under the

contract.

112. In view of the above discussion, we formulate our conclusions on this aspect.

First, the separability presumption contained in Section 16 is applicable not

only for the purpose of determining the jurisdiction of the arbitral tribunal. It

encapsulates the general rule on the substantive independence of an

arbitration agreement. Second, parties to an arbitration agreement mutually

intend to confer jurisdiction on the arbitral tribunal to determine questions as

115 (2009) 10 SCC 103

68
 PART F

to jurisdiction as well as substantive contractual disputes between them. The

separability presumption gives effect to this by ensuring the validity of an

arbitration agreement contained in an underlying contract, notwithstanding

the invalidity, illegality, or termination of such contract. Third, when the parties

append their signatures to a contract containing an arbitration agreement,

they are regarded in effect as independently appending their signatures to the

arbitration agreement. The reason is that the parties intend to treat an

arbitration agreement contained in an underlying contract as distinct from the

other terms of the contract; and Fourth, the validity of an arbitration

agreement, in the face of the invalidity of the underlying contract, allows the

arbitral tribunal to assume jurisdiction and decide on its own jurisdiction by

determining the existence and validity of the arbitration agreement. In the

process, the separability presumption gives effect to the doctrine of

competence-competence.

113. In view of the legal position, we now proceed to analyze the correctness of

the decision in N N Global 2 (supra). The Constitution Bench acknowledged

the separability presumption, but refused to apply it in the context of Sections

33 and 35 of the Stamp Act. The relevant observation of the Court is as

follows:

“157. […] The evolution of the principle that an arbitration is a

separate and distinct agreement from the contract, would
indicate that it would have no play in the context of the duty of
a Court, within the meaning of Sections 33 and 35 of the
Stamp Act, to act in consonance therewith.”

69
 PART G

114. The above position of law is contrary to the separability presumption which

treats an arbitration agreement as separate from the underlying contract.

G. The doctrine of competence-competence

115. 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. 116 However, many jurisdictions allow an arbitral tribunal to render

a decision on its jurisdiction, subject to substantive judicial review. 117

116. It is a well-recognized principle of public international law that a legal authority

possessing adjudicatory powers has the right to decide its own jurisdiction. 118

Similarly, it is a general rule of international arbitration law that an arbitral

tribunal has the power to determine its own jurisdiction. The ability of an

arbitral tribunal to determine its own jurisdiction is an important facet of

arbitration jurisprudence because it gives effect to the separability

presumption. The separability presumption insulates the arbitration

agreement from the defects of the underlying contract, and thereby ensures

the sustenance of the tribunal’s jurisdiction over the substantive rights and

obligations of the parties under the underlying contract even after such a

contract is put to an end. The doctrine of competence-competence allows the

116 Fouchard, Gaillard, Goldman on International Commercial Arbitration (edited by Emmanuel Gaillard and John
Savage, 1999) 396
117 Gary Born (n 62) 1143
118 Interpretation of Greco-Turkish Agreement of December 1st, 1926, Advisory Opinion, Series B – No. 16 (August

28, 1928).

70
 PART G

tribunal to decide on all substantive issues arising out of the underlying

contract, including the existence and validity of the arbitration agreement.

i. Comparative analysis

117. The doctrine of competence-competence is now a part of all major

jurisdictions. Section 30 of the UK Arbitration Act provides that the arbitral

tribunal may rule on its own substantive jurisdiction with respect to: first,

whether there is a valid arbitration agreement; second, whether the tribunal

is properly constituted; and third, what matters have been submitted to

arbitration in accordance with the arbitration agreement. The basis for the

jurisdictional competence of an arbitral tribunal can be evinced from the

following observation of Lord Hoffman in Fili Shipping Company Limited

(supra): “In my opinion the construction of an arbitration clause should start

from the assumption that the parties, as rational businessmen, are likely to

have intended any dispute rising out of the relationship into which they have

entered or purported to enter to be decided by the same tribunal.” In Dallah

Real Estate and Tourism Holding Company v. The Ministry of Religious

Affairs, Government of Pakistan, 119 the United Kingdom Supreme Court

held that the tribunal’s own view of its jurisdiction has no legal or evidential

value when the issue pertains to the exercise of legitimate authority by the

tribunal. Thus, the UK position is that although the arbitral tribunal is

empowered to consider whether it has jurisdiction, its determination is subject

to the examination of the courts.

119 [2010] UKSC 46

71
 PART G

118. The courts in the United States have considered the principle of competence-

competence to be intertwined with the separability presumption. In Prima

Paint (supra), the United States Supreme Court held that if a claim is made

to the effect that the underlying contract was induced fraudulently, then the

issue should be determined by the courts. The Supreme Court concluded that

all the other issues should be left for the determination of the arbitral tribunal

to “not only honor the plain meaning of the statute, but also the unmistakably

clear congressional purpose that the arbitration procedure, when selected by

the parties to a contract, be speedy, and not subject to delay and obstruction

in the courts.” In Buckeye Check Cashing (supra), the United States

Supreme Court reiterated Prima Paint (supra) by holding that the arbitral

tribunal should consider the issue of the validity of underlying contract in the

first instance. Thus, the position in the US is that the courts should only check

if any invalidity is directed at the arbitration agreement, leaving all the other

issues, including that of the validity of the underlying contract, to the arbitral

tribunal.

119. Under Singaporean law, Article 21(1) of the Arbitration Act, 2001 incorporates

the doctrine of competence-competence in so far as domestic arbitration is

concerned. It provides that an arbitral tribunal may rule on its own jurisdiction,

including a plea that it has no jurisdiction and any objections to the existence

or validity of the arbitration agreement at any stage of the arbitral proceedings.

The conduct of international commercial arbitrations in Singapore is governed

by the International Arbitration Act, 1994. 120 Section 3 of the IIA states that the

120 “IIA”

72
 PART G

Model Law has the force of law in Singapore. In Malini Ventura v. Knight

Capital Pte Ltd,121 the issue before the Singapore High Court was whether

the arbitral tribunal has primacy to determine the existence of an arbitration

agreement in the context of international commercial arbitration. The Court

analysed the scope and purpose of Article 16(1) of the Model Law to hold that

an arbitral tribunal has first priority in determining whether an arbitration

agreement exists and the court’s consideration must come after the tribunal’s

own examination of the issue. It was further observed that “the tribunal’s

powers in relation to the issue are wide because it can consider not only

validity but also the very existence of the arbitration agreement.” Thus, 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.

ii. India

120. Under the previous arbitration regime in India, that is the 1940 Act, the issue

of determining the existence or validity of arbitration agreement was

exclusively within the domain of the courts. To that effect, Section 33 of the

1940 Act allowed any party to the arbitration agreement to file an application

before the courts challenging the existence or validity of an arbitration

agreement. In view of this, this Court consistently held that the question as to

the existence or validity of an arbitration agreement was to be decided only

121 [2015] SGHC 225

73
 PART G

by application to courts and not by the arbitral tribunal.122 This position has

now undergone a complete metamorphosis in the present legislation. Section

16 of the Arbitration Act, which is based on Article 16 of the Model Law,

recognizes the doctrine of competence-competence in Indian arbitration law.

Section 16 empowers the arbitral tribunal to rule on its own jurisdiction,

including ruling on any objections with respect to the existence or validity of

arbitration agreement. Importantly, the parties have a right under Section

16(2) and 16(3) to challenge the jurisdiction of the arbitral tribunal on grounds

such as the non-existence or invalidity of the arbitration agreement. The

arbitral tribunal is obligated to decide on the challenge to its jurisdiction, and

where it rejects the challenge, it can proceed with the arbitral proceedings

and make an arbitral award. It is the principle of procedural competence-

competence which recognizes the power of an arbitral tribunal to hear and

decide challenges to its jurisdiction. Once the arbitral tribunal makes an

arbitral award, Section 16(6) allows the aggrieved party to make an

application for setting aside the award under Section 34. Sections 16(5) and

16(6) further show that Parliament has completely ousted the jurisdiction of

courts to interfere during the arbitral proceedings - courts can intervene only

after the tribunal has made an award. Thus, Section 16 is intended to give full

effect to the procedural and substantive aspects of the doctrine of

competence-competence.

122Dhanrajamal Gobindram v. Shamji Kalidas & Co., 1961 SCC OnLine SC 28; Khardah Co. Ltd. v. Raymon
& Co. (India) Private Ltd., 1962 SCC OnLine SC 28.

74
 PART G

121. Section 34 of the Arbitration Act deals with applications for setting aside

arbitral awards. Section 34(2) provides that an arbitral award may be set aside

by the Court only if the party making the application establishes, on the basis

of the record of the arbitral tribunal, any of the following five grounds:

(i) a party was under some incapacity; or

(ii) the arbitration agreement is not valid under the law to which the parties

have subjected it or, failing any indication thereon, under the law for the

time being in force; or

(iii) the party making an application was not given proper notice of the

appointment of an arbitrator or of the arbitral proceedings or was

otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not failing

within the terms of the submission to arbitration, or it contains decisions

on matters beyond the scope of the submission to arbitration, provided

that if the decisions on matters submitted to arbitration can be separated

from those not so submitted, only that part of the arbitral award which

contains decisions on matters not submitted to arbitration may be set

aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not

in accordance with the agreement of the parties, unless such agreement

was in conflict with a provision of Part I from which the parties cannot

derogate, or, failing such agreement, was not in accordance with Part I.

75
 PART G

Moreover, the court can set aside an arbitral award if it finds that:

(i) the subject-matter of the dispute is not capable of settlement by

arbitration under the law for the time being in force; or

(ii) the arbitral award is in conflict with the public policy of India.

122. Under Section 34, the grounds for setting aside an arbitral award are specific.

The provision requires a party challenging an award to plead and prove the

existence of one or more such grounds. 123 The scheme of the Arbitration Act

shows that although an arbitral tribunal is given priority to determine all issues

pertaining to its jurisdiction based on the principle of competence-

competence, the tribunal’s decision is subject to judicial review at the stage

when an award is challenged. Moreover, one of the grounds on which an

arbitral award can be set aside is that the arbitration agreement is not valid

under law. This indicates that the Arbitration Act does not contemplate the

court determining the validity of an arbitration agreement at a pre-arbitral

stage.

123. In Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products, 124

one of the issues before this Court was whether a decision on the issue of

limitation would go to the root of the jurisdiction of the arbitral tribunal, and

therefore be covered by Section 16 of the Arbitration Act. This Court referred

to Section 16(1) to observe that “the Arbitral Tribunal may rule on its own

jurisdiction, which makes it clear that it refers to whether the Arbitral Tribunal

may embark upon an inquiry into the issues raised by the parties to the

123 Fiza Developers and Inter-Trade (P) Ltd. v. Amci (I) (P) Ltd., (2009) 17 SCC 796
124 (2018) 2 SCC 534

76
 PART G

dispute.” In Bhadra Products (supra), it was held that the issue of limitation

concerns the jurisdiction of the tribunal which tries the proceedings.

124. In Uttarakhand Purv Sainik Kalyan Nigam Ltd v. Northern Coal Field, 125

the issue before this Court was whether a referral court at the stage of

appointment of arbitrators would be required to decide the issue of limitation

or leave it to the arbitral tribunal. A Bench of two Judges of this Court held that

the doctrine of competence-competence is “intended to minimize judicial

intervention, so that the arbitral process is not thwarted at the threshold, when

a preliminary objection is raised by one of the parties.” Moreover, this Court

held that Section 16 is an inclusive provision of very wide ambit:

“7.13. In view of the provisions of Section 16, and the

legislative policy to restrict judicial intervention at the pre-
reference stage, the issue of limitation would require to be
decided by the arbitrator. Sub-section (1) of Section 16
provides that the Arbitral Tribunal may rule on its own
jurisdiction, “including any objections” with respect to
the existence or validity of the arbitration agreement.
Section 16 is an inclusive provision, which would
comprehend all preliminary issues touching upon the
jurisdiction of the Arbitral Tribunal. The issue of limitation
is a jurisdictional issue, which would be required to be decided
by the arbitrator under Section 16, and not the High Court at
the pre-reference stage under Section 11 of the Act. Once the
existence of the arbitration agreement is not disputed, all
issues, including jurisdictional objections are to be decided by
the arbitrator.”

(emphasis supplied)

125. In view of the above discussion, the issue that comes up for our consideration

is whether an issue of stamping is a jurisdictional issue. Jurisdiction is

generally defined as the power of a court or tribunal to hear and determine a

125 (2020) 2 SCC 455

77
 PART G

cause, and to adjudicate or exercise any judicial power in relation to such

cause. 126 Jurisdiction refers to the authority of a court or tribunal to decide

matters that are litigated before it or to take cognizance of matters presented

before it in a formal way for its decision. In Official Trustee, West Bengal v.

Sachindra Nath Chatterjee, 127 this Court held that for a court to have

jurisdiction to decide a particular matter, it must not only have jurisdiction to

try the suit brought but must also have the authority to pass the orders sought.

In NTPC v. Siemens Atkeingesllchaft, 128 this Court observed that any

refusal to go into the merits of a claim may be in the realm of jurisdiction.

Accordingly, it was observed that the issue of limitation goes to jurisdiction

because if a claim is barred by limitation, a tribunal can refuse to exercise its

jurisdiction.

126. Section 35 of the Stamp Act mandates that an unstamped instrument cannot

be acted upon unless it is duly stamped. The question is whether a tribunal

can effectively exercise its jurisdiction to settle the claims between the parties

until stamp duty is paid on the underlying instrument. In view of the decision

of this Court in Uttarakhand Purv Sainik Kalyan Nigam Ltd (supra), the

scope of an arbitral tribunal’s authority is wide enough as to comprehend all

preliminary issues affecting its jurisdiction, including the issue of sufficiency

of stamping.

127. In case the issue of stamping is raised before an arbitral tribunal, Sections 33

and 35 of the Stamp Act make it evident that a person having authority by

126 Sukh Lal Sheikh v. Tara Chand Ta, 1905 SCC OnLine Cal 164
127 (1969) 3 SCR
128 (2007) 4 SCC 451

78
 PART G

“consent of parties” to receive evidence is empowered to impound and

examine an instrument. A person having authority “by consent of parties” to

receive evidence includes an arbitral tribunal which is constituted by consent

of parties.

iii. Negative competence-competence

128. 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 two-

fold: 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.

129. 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. Thus, the negative aspect of the doctrine

of competence-competence suggests that the courts should refrain from

entertaining challenge to the jurisdiction of the arbitral tribunal before the

arbitrators themselves have had an opportunity to do so. 129 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

129 George A Bermann, ‘The “Gateway” Problem in International Commercial Arbitration’ (2012) 37 Yale Journal of
International Law 1, 16.

79
 PART G

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. 130

130. In Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.,131

one of the issues before this Court was whether the court at the referral stage

under Section 45 is required to determine the validity of an arbitration

agreement. This Court recognized that the doctrine of competence-

competence has both the positive and the negative aspects. It was observed

that while the positive aspect enables the arbitrator to rule on its own

jurisdiction, the negative aspect deprives the courts of their jurisdiction.

However, this Court noted the absence of a provision similar to Section 16 in

Part II to conclude that the referral court is required to test for the ingredients

of Section 45 at the threshold stage itself.

131. Thereafter, this Court in Vidya Drolia (supra) held that the doctrine of

competence-competence has both negative and positive connotations. The

relevant extract from the decision is set out below:

“129. Principles of competence-competence have positive

and negative connotations. As a positive implication, the
Arbitral Tribunals are declared competent and authorised by
law to rule as to their jurisdiction and decide non-arbitrability
questions. In case of expressed negative effect, the statute
would govern and should be followed. Implied negative effect

130 Fouchard (n 116) 401

131 (2013) 1 SCC 641

80
 PART H

curtails and constrains interference by the court at the referral

stage by necessary implication in order to allow the Arbitral
Tribunal to rule as to their jurisdiction and decide non-
arbitrability questions. As per the negative effect, courts at the
referral stage are not to decide on merits, except when
permitted by the legislation either expressly or by necessary
implication, such questions of non-arbitrability. Such
prioritisation of the Arbitral Tribunal over the courts can be
partial and limited when the legislation provides for some or
restricted scrutiny at the “first look” referral stage. We would,
therefore, examine the principles of competence-competence
with reference to the legislation, that is, the Arbitration Act.”

132. In Arcelormittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., 132

this Court held that negative competence-competence prohibits courts from

hearing disputes which the parties have mutually intended to submit to the

jurisdiction of arbitral tribunal. As held in the preceding sections, the issue of

stamping is a jurisdictional issue. The principle of negative competence-

competence requires the courts to leave the issue of stamping to be decided

by the arbitral tribunal in the first instance.

H. Judicial interference under the Arbitration Act

133. When parties enter into an arbitration agreement, it is their mutual and

unequivocal intention to submit their disputes to an arbitral tribunal. The

arbitration law recognizes this aspect by granting autonomy to the parties to

adopt a procedural mechanism for the appointment of arbitrators. Party

autonomy has also been expressly recognized by international arbitration

covenants as well as national arbitration legislations. For instance, Article

11(2) of the Model Law states that parties to an arbitration agreement are free

132 (2022) 1 SCC 712

81
 PART H

to agree on a procedure for appointing the arbitrator or arbitrators. In a

situation where the agreed procedure of the parties fails, the Model Law

permits the national courts to appoint arbitrators on a request of a party. The

recourse to judicial appointment of arbitrators is often invoked as a last resort

by the parties when their agreed procedure becomes unworkable. The power

of appointment of arbitrators is vested with national courts to resolve the

deadlock in appointment of an arbitrator. 133

134. As discussed in the preceding segments of this judgment, Section 5 of the

Arbitration Act disallows a judicial authority from intervening unless expressly

provided under Part I. In the present proceedings, the exercise of the powers

by the courts or judicial authorities as provided under Section 8 and 11

becomes particularly relevant for our consideration.

135. According to Fouchard, an arbitration agreement has both a positive and

negative effect. The positive effect is that the parties ought to honor their

undertaking to submit to arbitration any disputes covered by their arbitration.

On the flip side, the negative effect of the arbitration agreement is that courts

are prohibited from hearing such disputes. 134 Most international covenants

have recognised the principle that courts lack jurisdiction to hear disputes

covered by an arbitration agreement. For instance, Article II(3) of the New

York Convention states that “[t]he court of a Contracting State, when seized

of an action in a matter in respect of which the parties have made an

agreement within the meaning of this article, shall, at request of one of the

133 Digest of Case Law on the Model Law on International Commercial Arbitration (2012) 60
134 Fouchard (n 116) 402

82
 PART H

parties, refer the parties to arbitration, unless it finds that the said agreement

is null and void, inoperative or incapable of being performed.”

136. In the Indian context, Section 8 provides that when an action is brought before

a judicial authority in a matter which is the subject of an arbitration agreement,

such judicial authority shall refer the parties to arbitration on an application

made by a party to the arbitration agreement or any person claiming through

or under him not later than the date of submitting their first statement on the

substance of the dispute. Section 8 mandates the judicial authority to refer

the parties to arbitration “unless it finds that prima facie no valid arbitration

agreement exists.” Section 8 is based on Article 8 of the Model Law which

provides that a “court” before which an action is brought in a matter which is

the subject of an arbitration agreement shall refer the parties to arbitration

“unless it finds that the agreement is null and void, inoperative or incapable

of being performed.” It is evident that Section 8 has made a departure from

Article 8 by using the expansive term “judicial authority” rather than “court.”

The intention of the legislature to provide an expansive application can also

be gauged from the fact that the expression “unless it finds that the agreement

is null and void, inoperative or incapable of being performed” does not find

place in Section 8. 135

137. According to the UNCITRAL Working Group Commentary on the Model Law,

Article 8 of the Model Law enshrines the “negative effect” of an arbitration

agreement.136 Moreover, Article 8 gives effect to the intention of the parties to

A Ayyasamy v. A Paramsivam, (2016) 10 SCC 386

135

Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration, A/CN.9/264 (25
136

March 1985) 38.

83
 PART H

submit their disputes to arbitration to the exclusion of courts, irrespective of

whether such exclusion is expressed in the agreement. Similar legislation has

also been incorporated under the English 137 and French138 national laws. It is

worth noting that most of the national legislations entitle the courts at the

referral stage to review the existence and validity of arbitration agreements.

For example, Section 9(4) of the English Arbitration Act, 1996 provides that a

court can stay the legal proceedings unless satisfied that the arbitration

agreement “is null and void, inoperative, or incapable of being performed.”

Similarly, Article 1458 of the French Civil Code provides that a state court is

incompetent to decide on issues pertaining to an arbitration agreement,

unless the arbitration agreement is “manifestly null and void.” Thus, the

standard of review that the court should adopt at the pre-arbitral stage differs

considerably across jurisdictions.

138. One of the major bottlenecks in the smooth functioning of arbitral proceedings

is the inability of the parties to ensure the constitution of the arbitral tribunal

once the dispute has arisen. To ensure that such disagreement between the

parties does not derail the arbitral proceedings, international covenants as

well as national laws allow judicial authorities to assist the parties in

appointing arbitrators. For instance, Article 1444 of the French Civil Code in

137 Article 9(1) of UK Arbitration Act: It reads: “(1)A party to an arbitration agreement against whom legal
proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the
agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the
court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.
[…]
(4) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement
is null and void, inoperative, or incapable of being performed.”
138 Article 1458 of French Code of Civil Procedure, 1981. It reads: “If a dispute pending before an arbitral tribunal

on the basis of an arbitration agreement is brought before a State court, it shall declare itself incompetent.
If the dispute is not yet before an arbitral tribunal, the State court shall also declare itself incompetent, unless the
arbitration agreement is manifestly null and void.”

84
 PART H

the context of domestic arbitration provides that “[i]f a dispute has arisen and

problems occur with regard to the constitution of the arbitral tribunal due to

the behavior of a party or to the implementation of the appointment method,

the arbitrator or arbitrators shall be appointed by the President of the Tribunal

de Grande Instance.”139 The said provision further provides that the President

shall declare that there is no basis for appointment if the “arbitration clause is

manifestly null and void or insufficient to constitute an arbitral tribunal.” The

basis for providing judicial intervention to the extent of determining the validity

of arbitration agreement is to ensure that the courts do not mechanically

appoint arbitrators in situations where the arbitration does not have any

contractual basis. 140

139. Section 11 of the Arbitration Act deals with the appointment of arbitrators. It

recognizes the autonomy of the parties to agree upon a procedure for

appointment of an arbitrator or arbitrators. Section 11 requires the intervention

of the court only when there is a deadlock or failure of the parties to follow the

appointment procedure. In the process, Section 11 is meant to give effect to

the mutual intention of the parties to settle their disputes by arbitration in

situations where the parties fail to appoint an arbitrator or arbitrators. In an

arbitration with three arbitrators, each party is required to appoint one

arbitrator each, and subsequently the two arbitrators will appoint the third

arbitrator. Section 11(6) confers powers on the Supreme Court and the High

Court, as the case may be, on the failure of the parties to comply with the

139 Article 1444, French Code of Civil Procedure.

140 Fouchard (n 116) 495

85
 PART H

agreed arbitration procedure. Section 11(6) enlists three possible defects in

the appointment procedure, namely: first, a party fails to act as required by

the agreed procedure; second, the parties or the two appointed arbitrators fail

to reach an agreement expected of them under that procedure; or third, a

person, including an institution, fails to perform any function entrusted to them

or under the agreed procedure.

140. Section 11(6) has had a long and chequered history before this Court,

particularly in respect of the nature of function of the Chief Justice or his

designate in the appointment of an arbitrator. In SPB & Co. v. Patel

Engineering Ltd.,141 a seven-Judge Bench of this Court held that the power

exercised by the Chief Justice of India or a Chief Justice of the High Court

under Section 11(6) is a judicial power. In the process, this Court analysed

the scope of the powers and authority of the referral court under Section 11(6).

Moreover, this Court noted that Sections 8 and 11 are complementary in

nature. Consequently, if the judicial authority acting under Section 8 has to

mandatorily decide the issue of jurisdiction before referring the parties to

arbitration, the same standard of scrutiny was also held to be applicable to

the reference under Section 11. In conclusion, it was held that the Chief

Justice or their designate at the referral stage under Section 11(6) had the

right to determine all preliminary issues:

“47 (iv) The Chief Justice or the designated Judge will have
the right to decide the preliminary aspects as indicated in the
earlier part of this judgment. These will be his own jurisdiction
to entertain the request, the existence of a valid arbitration
agreement, the existence or otherwise of a live claim, the

141 (2005) 8 SCC 618

86
 PART H

existence of the condition for the exercise of his power and on

the qualifications of the arbitrator or arbitrators. The Chief
Justice or the designated Judge would be entitled to seek the
opinion of an institution in the matter of nominating an
arbitrator qualified in terms of Section 11(8) of the Act if the
need arises but the order appointing the arbitrator could only
be that of the Chief Justice or the designated Judge.”

141. The extent of judicial interference at the referral stage was scrutinised by a

Bench of two Judges of this Court in National Insurance Co. Ltd. v. Boghara

Polyfab Pvt. Ltd. 142 This Court held that when the intervention of the court is

sought under Section 11 of the Arbitration Act, the following categories of

issues will arise before the referral court:

(i) The issues which the Chief Justice or his designate is bound to decide.

These issues were: first, whether the party making the application has

approached the appropriate High Court; and second, whether there is a

valid arbitration agreement and whether the party who has applied under

Section 11 of the Act, is a party to such an agreement;

(ii) The issues which the Chief Justice or his designate may choose to

decide or leave them to the decision of the arbitral tribunal. These issues

were: first, whether the claim is a dead (long-barred) claim or a live claim;

and second, whether the parties have concluded the contract/

transaction by recording the satisfaction of their mutual rights and

obligations or by receiving the final payment without objection; and

(iii) The issues which the Chief Justice or their designate should leave

exclusively to the arbitral tribunal. These issues were: first, whether a

142 (2009) 1 SCC 267

87
 PART H

claim made falls within the arbitration clause (as for example, a matter

which is reserved for final decision of a departmental authority and

excepted or excluded from arbitration); and second, merits or any claim

involved in the arbitration.

142. The decisions of this Court in Patel Engineering (supra) and Boghara

Polyfab (supra) allowed for greater judicial interference at the pre-arbitral

stage. In effect, the referral courts were encouraged to conduct mini-trials

instead of summarily dealing with the preliminary issues. This was also noted

by the Law Commission of India, which observed that judicial intervention in

the arbitral proceedings is a pervasive problem in India leading to significant

delays in the arbitration process. 143 The Law Commission recognized that one

of the problems plaguing implementation of the Arbitration Act was that

Section 11 applications were kept pending for years by the courts. To remedy

the situation, the Law Commission proposed changing the then existing

scheme of the power of appointment being vested in the “Chief Justice” to the

“High Court” and the “Supreme Court”. It also clarified that the power of

appointment of arbitrators ought not to be regarded as a judicial act.

143. Significantly, the Law Commission observed that there was a need to reduce

judicial intervention at the pre-arbitral stage, that is, prior to the constitution of

the arbitral tribunal. Accordingly, it proposed limiting the scope of the judicial

intervention at the referral stage under Sections 8 and 11 of the Arbitration Act

“to situations where the Court/ Judicial Authority finds that the arbitration

agreement does not exist or is null and void.” The Law Commission

143 Law Commission of India, 246th Report (2014)

88
 PART H

suggested insertion of sub-section 6A under Section 11 which would read:

“Any appointment by the High Court or the person or institution designated by

it under sub-section (4) or sub-section (5) or sub-section (6) shall not be made

only if the High Court finds that the arbitration does not exist or is null and

void.” In light of the recommendations of the Law Commission, Parliament

passed the Arbitration and Conciliation (Amendment) Act 2015 144 to

incorporate Section 11(6-A).

144. The Statement of Objects and Reasons of the 2015 Amendment Act states

that sub-section (6A) is inserted in Section 11 to provide that the Supreme

Court or the High Court while considering application under sub-section (4) to

(6) “shall confine to the examination of an arbitration agreement.” With the

coming into force of the 2015 Amendment Act, the nature of preliminary

examination at the referral stage under Section 11 was confined to the

existence of an arbitration agreement. It also incorporates a non-obstante

clause which covers “any judgment, decree or order of any Court.” By virtue

of the non-obstante clause, Section 11(6A) has set out a new position of law,

which takes away the basis of the position laid down by the previous decisions

of this Court in Patel Engineering (supra) and Boghara Polyfab (supra). It

is also important to note that Parliament did not incorporate the expression

“or is null and void” as was suggested by the Law Commission. This indicates

that Parliament intended to confine the jurisdiction of the courts at the pre-

arbitral stage to as minimum a level as possible.

144 “2015 Amendment Act”

89
 PART H

145. The effect and impact of the 2015 Amendment Act was subsequently clarified

by this Court. In Duro Felguera, S A v. Gangavaram Port Ltd., 145 Justice

Kurien Joseph noted that the intention of the legislature in incorporating

Section 11(6A) was to limit the scope of the referral court’s jurisdiction to only

one aspect – the existence of an arbitration agreement. To determine the

existence of an arbitration agreement, the court only needs to examine

whether the underlying contract contains a clause which provides for

arbitration pertaining to the disputes which have arisen between the parties

to the agreement. This Court further held that Section 11(6A) incorporates the

principle of minimal judicial intervention:

“59. The scope of the power under Section 11(6) of the 1996
Act was considerably wide in view of the decisions in SBP and
Co. and Boghara Polyfab. This position continued till the
amendment brought about in 2015. After the amendment, all
that the courts need to see is whether an arbitration
agreement exists—nothing more, nothing less. The legislative
policy and purpose is essentially to minimise the Court's
intervention at the stage of appointing the arbitrator and this
intention as incorporated in Section 11(6-A) ought to be
respected.”

146. In 2017, the High-Level Committee to Review the Institutionalization of

Arbitration Mechanism in India submitted a report noting that while the 2015

amendment facilitated the speedy disposal of Section 11 applications, they

failed to limit judicial interference in arbitral proceedings. Accordingly, the

High-Level Committee recommended the amendment of Section 11 to

provide for appointment of arbitrators solely by arbitral institutions designated

by the Supreme Court in case of international commercial arbitrations or the

145 (2017) 9 SCC 729

90
 PART H

High Court in case of all other arbitrations. In view of the report of the High-

Level committee, Parliament enacted the Arbitration and Conciliation

(Amendment) Act 2019 146 omitting Section 11(6A) so as to leave the

appointment of arbitrators to arbitral institutions. Section 1(2) of the 2019

Amendment Act provides that amended provisions shall come into force on

such date as notified by the Central Government in the official gazette

However, Section 3 of the 2019 Amendment Act which amended Section 11

by omitting Section 11(6A) is yet to be notified. Till such time, Section 11(6A)

will continue to operate.

147. In Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, 147 a three-Judge

Bench of this Court affirmed the reasoning in Duro Felguera (supra) by

observing that the examination under Section 11(6A) is “confined to the

examination of the existence of an arbitration agreement and is to be

understood in the narrow sense.” Moreover, it held that the position of law

prior to the 2015 Amendment Act, as set forth by the decisions of this Court

in Patel Engineering (supra) and Boghara Polyfab (supra), has been

legislatively overruled. Thus, this Court gave effect to the intention of the

legislature in minimizing the role of the courts at the pre-arbitral stage to the

bare minimum.

148. Thereafter, in Vidya Drolia (supra), another three-Judge Bench of this Court,

affirmed the ruling in Mayavati Trading (supra) that Patel Engineering

(supra) has been legislatively overruled. In Vidya Drolia (supra), one of the

146 “2019 Amendment Act”

147 (2019) 8 SCC 714

91
 PART H

issues before this Court was whether the court at the reference stage or the

arbitral tribunal in the arbitration proceedings would decide the question of

non-arbitrability. This Court began its analysis by holding that an arbitration

agreement has to satisfy the mandate of the Contract Act, in addition to

satisfying the requirements stipulated under Section 7 of the Arbitration Act to

qualify as an agreement.

149. In the course of the decision, one of the questions before this Court in Vidya

Drolia (supra) was the interpretation of the word “existence” as appearing in

Section 11. It was held that existence and validity are intertwined. Further, it

was observed that an arbitration agreement does not exist if it is illegal or

does not satisfy mandatory legal requirements. Therefore, this Court read the

mandate of valid arbitration agreement contained in Section 8 into the

mandate of Section 11, that is, “existence of an arbitration agreement.”

150. At the outset, Vidya Drolia (supra) noted that “Section 11 has undergone

another amendment vide Act 33 of 2019 with effect from 9-8-2019.” The

purport of the omission of the said clause was further explained in the

following terms:

“145. Omission of sub-section (6-A) by Act 33 of 2019 was

with the specific object and purpose and is relatable to by
substitution of sub-sections (12), (13) and (14) of Section 11
of the Arbitration Act by Act 33 of 2019, which, vide sub-
section (3-A) stipulates that the High Court and this Court
shall have the power to designate the arbitral institutions
which have been so graded by the Council under Section 43-
I, provided where a graded arbitral institution is not available,
the High Court concerned shall maintain a panel of arbitrators
for discharging the function and thereupon the High Court
shall perform the duty of an arbitral institution for reference to
the Arbitral Tribunal. Therefore, it would be wrong to accept
that post omission of sub-section (6-A) of Section 11 the ratio

92
 PART H

in Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8
SCC 618] would become applicable.”

151. Vidya Drolia (supra) proceeds on the presumption that Section 11(6A) was

effectively omitted from the statute books by the 2019 Amendment Act. This

is also reflected in the conclusion arrived at by the Court, as is evident from

the following extract:

“154.1. Ratio of the decision in Patel Engg. Ltd. [SBP &

Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] on the scope of
judicial review by the court while deciding an application under
Sections 8 or 11 of the Arbitration Act, post the amendments
by Act 3 of 2016 (with retrospective effect from 23-10-2015)
and even post the amendments vide Act 33 of 2019 (with
effect from 9-8-2019), is no longer applicable.”

(emphasis supplied)

152. We are of the opinion that the above premise of the Court in Vidya Drolia

(supra) is erroneous because the omission of Section 11(6A) has not been

notified and, therefore, the said provision continues to remain in full force.

Since Section 11(6A) continues to remain in force, pending the notification of

the Central Government, it is incumbent upon this Court to give true effect to

the legislative intent.

153. The 2015 Amendment Act has laid down different parameters for judicial

review under Section 8 and Section 11. Where Section 8 requires the referral

court to look into the prima facie existence of a valid arbitration agreement,

Section 11 confines the court’s jurisdiction to the examination of the

existence of an arbitration agreement. Although the object and purpose

behind both Sections 8 and 11 is to compel parties to abide by their

contractual understanding, the scope of power of the referral courts under the

said provisions is intended to be different. The same is also evident from the

93
 PART H

fact that Section 37 of the Arbitration Act allows an appeal from the order of

an arbitral tribunal refusing to refer the parties to arbitration under Section 8,

but not from Section 11. Thus, the 2015 Amendment Act has legislatively

overruled the dictum of Patel Engineering (supra) where it was held that

Section 8 and Section 11 are complementary in nature. Accordingly, the two

provisions cannot be read as laying down a similar standard.

154. The legislature confined the scope of reference under Section 11(6A) to the

examination of the existence of an arbitration agreement. The use of the term

“examination” in itself connotes that the scope of the power is limited to a

prima facie determination. Since the Arbitration Act is a self-contained code,

the requirement of “existence” of an arbitration agreement draws effect from

Section 7 of the Arbitration Act. In Duro Felguera (supra), this Court held that

the referral courts only need to consider one aspect to determine the

existence of an arbitration agreement – whether the underlying contract

contains an arbitration agreement which provides for arbitration pertaining to

the disputes which have arisen between the parties to the agreement.

Therefore, the scope of examination under Section 11(6A) should be confined

to the existence of an arbitration agreement on the basis of Section 7.

Similarly, the validity of an arbitration agreement, in view of Section 7, should

be restricted to the requirement of formal validity such as the requirement that

the agreement be in writing. This interpretation also gives true effect to the

doctrine of competence-competence by leaving the issue of substantive

existence and validity of an arbitration agreement to be decided by arbitral

tribunal under Section 16. We accordingly clarify the position of law laid down

94
 PART H

in Vidya Drolia (supra) in the context of Section 8 and Section 11 of the

Arbitration Act.

155. The burden of proving the existence of arbitration agreement generally lies

on the party seeking to rely on such agreement. In jurisdictions such as India,

which accept the doctrine of competence-competence, only prima facie proof

of the existence of an arbitration agreement must be adduced before the

referral court. The referral court is not the appropriate forum to conduct a mini-

trial by allowing the parties to adduce the evidence in regard to the existence

or validity of an arbitration agreement. The determination of the existence and

validity of an arbitration agreement on the basis of evidence ought to be left

to the arbitral tribunal. This position of law can also be gauged from the plain

language of the statute.

156. Section 11(6A) uses the expression “examination of the existence of an

arbitration agreement.” The purport of using the word “examination” connotes

that the legislature intends that the referral court has to inspect or scrutinize

the dealings between the parties for the existence of an arbitration

agreement. Moreover, the expression “examination” does not connote or

imply a laborious or contested inquiry. 148 On the other hand, Section 16

provides that the arbitral tribunal can “rule” on its jurisdiction, including the

existence and validity of an arbitration agreement. A “ruling” connotes

adjudication of disputes after admitting evidence from the parties. Therefore,

it is evident that the referral court is only required to examine the existence of

arbitration agreements, whereas the arbitral tribunal ought to rule on its

148 P Ramanatha Aiyar, The Law Lexicon (Second edition, 1997) 666

95
 PART H

jurisdiction, including the issues pertaining to the existence and validity of an

arbitration agreement. A similar view was adopted by this Court in Shin-Etsu

Chemical Co. Ltd. v. Aksh Optifibre Ltd.149

157. In Shin-Etsu (supra), this Court was called upon to determine the nature of

adjudication contemplated by unamended Section 45 of the Arbitration Act

when the objection with regards to the arbitration agreement being “null and

void, inoperative or incapable of being performed” is raised before a judicial

authority. Writing for the majority, Justice B N Srikrishna held that Section 45

does not require the judicial authority to give a final determination. The court

observed that:

“74. There are distinct advantages in veering to the view that

Section 45 does not require a final determinative finding by
the court. First, under the Rules of Arbitration of the
International Chamber of Commerce (as in force with effect
from 1-1-1998), as in the present case, invariably the Arbitral
Tribunal is vested with the power to rule upon its own
jurisdiction. Even if the court takes the view that the arbitral
agreement is not vitiated or that it is not invalid, inoperative or
unenforceable, based upon purely a prima facie view, nothing
prevents the arbitrator from trying the issue fully and rendering
a final decision thereupon. If the arbitrator finds the agreement
valid, there is no problem as the arbitration will proceed and
the award will be made. However, if the arbitrator finds the
agreement invalid, inoperative or void, this means that the
party who wanted to proceed for arbitration was given an
opportunity of proceeding to arbitration, and the arbitrator
after fully trying the issue has found that there is no scope for
arbitration. Since the arbitrator's finding would not be an
enforceable award, there is no need to take recourse to the
judicial intercession available under Section 48(1)(a) of the
Act.”

149 (2005) 7 SCC 234

96
 PART I

158. When the referral court renders a prima facie opinion, neither the arbitral

tribunal, nor the court enforcing the arbitral award will be bound by such a

prima facie view. If a prima facie view as to the existence of an arbitration

agreement is taken by the referral court, it still allows the arbitral tribunal to

examine the issue in-depth. Such a legal approach will help the referral court

in weeding out prima facie non-existent arbitration agreements. It will also

protect the jurisdictional competence of the arbitral tribunals to decide on

issues pertaining to the existence and validity of an arbitration agreement.

I. Harmonious construction of the Arbitration Act, the Stamp Act, and the

Contract Act

159. One of the cardinal principles of the interpretation of statutes is to discover

and give effect to the legislative intention. If a statute is susceptible to two

interpretations, the court will have to reject the construction which will defeat

the plain intention of the legislation. 150 The court has to ascertain the intention

of the legislation by considering not only the clause to be interpreted, but also

the entirety of the statute. The legislature often enacts a statute to give effect

to legislative policy. When enacting a statute, the legislature often endeavors

to ensure that the provisions of a statute do not contradict the provisions of

the same statute or provisions of another statute. However, inconsistencies

or contradictions may nonetheless arise between statutes. In such situations,

it is left to the court to bring about a harmony between the working of such

statutes.

150 CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57

97
 PART I

160. In Sultana Begum v. Prem Chand Jain,151 this Court analysed the relevant

decisions of this Court and laid down the following principles pertaining to the

harmonious construction of statutes:

a. It is the duty of the courts to avoid a head-on clash between two sections

of the Act and to construe the provisions which appear to be in conflict

with each other in such a manner as to harmonise them;

b. The provisions of one section of a statute cannot be used to defeat the

other provisions unless the court, in spite of its efforts, finds it impossible

to effect reconciliation between them;

c. When there are two conflicting provisions in an Act, which cannot be

reconciled with each other, they should be so interpreted that, if possible,

effect should be given to both. This is the essence of the rule of

harmonious construction;

d. The courts have also to keep in mind that an interpretation which

reduces one of the provisions to a “dead letter” or “useless lumber” is

not harmonious construction; and

e. To harmonize is not to destroy any statutory provision or to render it

otiose.

161. In Kandla Export Corporation v. OCI Corporation 152, the issue before this

Court was whether an appeal which was not maintainable under Section 50

of the Arbitration Act was nonetheless maintainable under Section 13(1) of

151 (1997) 1 SCC 373

152 (2018) 14 SCC 715

98
 PART I

the Commercial Courts Act 2015. Section 50 the Arbitration Act provides that

no appeal shall lie from the order refusing to: (a) refer the parties to arbitration

under section 45; and (b) enforce a foreign award under section 48. Section

13(1) of the Commercial Courts Act, 2015 allows any person aggrieved by the

decision of the Commercial Court or Commercial Division of a High Court to

file an appeal before the Commercial Appellate Division of that High Court.

162. This Court referred to the objects of both the statutes to observe that the

Arbitration Act is meant to effectuate a speedy resolution of disputes between

parties, while the Commercial Courts Act 2015 is for the speedy resolution of

commercial disputes involving significant amounts of money. It was held that

the provision of another appeal under Section 13(1) of the Commercial Courts

Act 2015 in matters of foreign arbitration would be against the object of

speedy enforcement of foreign arbitral awards. Therefore, this Court held that

any construction of Section 13 of the Commercial Courts Act, 2015 which

would lead to further delay, instead of an expeditious enforcement of a foreign

award must be eschewed:

“Even on applying the doctrine of harmonious construction of

both statutes, it is clear that they are best harmonized by
giving effect to the special statute i.e. the Arbitration Act, vis-
à-vis the more general statute, namely, the Commercial
Courts Act, being left to operate in spheres other than
arbitration.”

163. In Silpi Industries v. Kerala State Road Transport Corporation,153 the

issue before this Court was whether a counter-claim was maintainable in

arbitration proceedings initiated under Section 18(3) of the Micro, Small and

153 2021 SCC OnLine SC 439

99
 PART I

Medium Enterprises Development Act 2006. Section 18(3) provides that

where the conciliation proceedings initiated by any party are not successful

and stand terminated without any settlement between the parties, the Micro

and Small Enterprises Facilitation Council shall either take up the dispute for

arbitration or refer it to any institution or centre. The said provision further

states that the provisions of the Arbitration Act shall then apply to the disputes

as if the arbitration was in pursuance of an arbitration agreement referred to

in Section 7(1) of the Arbitration Act.

164. This Court noted that Section 23(2A) of the Arbitration Act gives the

respondent a right to submit a counter-claim or plead a set-off, which shall be

adjudicated upon by the arbitral tribunal. It was held that since Section 18(3)

of the MSME Act expressly provides that proceedings initiated under Section

18(3) shall be carried out as if they were in pursuance of an arbitration

agreement under Section 7(1) of the Arbitration Act, the right to make a

counter-claim before the statutory authorities exists under the MSMED Act. In

this way, the two statutes were harmonized.

165. In the present reference, the challenge before this Court is to harmonize the

provisions of the Arbitration Act and the Stamp Act. The object of the

Arbitration Act is to inter alia ensure an efficacious process of arbitration and

minimize the supervisory role of courts in the arbitral process. On the other

hand, the object of the Stamp Act is to secure revenue for state. It is a cardinal

principle of interpretation of statutes that provisions contained in two statutes

must be, if possible, interpreted in a harmonious manner to give full effect to

100
 PART I

both the statutes. 154 In providing a harmonious interpretation, this Court has

to be cognizant of the fact that it does not defeat the purpose of the statutes

or render them ineffective. 155 The challenge, therefore, before this Court is to

preserve the workability and efficacy of both the Arbitration Act and the Stamp

Act. 156

i. The Arbitration Act will have primacy with respect to arbitration

agreements

166. As discussed in the preceding segments, the Arbitration Act is a legislation

enacted to inter alia consolidate the law relating to arbitration in India. It will

have primacy over the Stamp Act and the Contract Act in relation to arbitration

agreements for multiple reasons.

a. The Arbitration Act is a special law and the Indian Contract Act and

the Stamp Act are general laws

167. It is trite law that a general law must give way to a special law. This rule of

construction stems from the doctrine generalia specialibus non derogant. In

LIC v. D.J. Bahadur, 157 this Court held:

“52. In determining whether a statute is a special or a general

one, the focus must be on the principal subject-matter plus
the particular perspective. For certain purposes, an Act may
be general and for certain other purposes it may be special
and we cannot blur distinctions when dealing with finer points
of law.”

154 Jagdish Singh v. Lt. Governor, Delhi, (1997) 4 SCC 435

155 State of Tamil Nadu v. M K Kandaswami, (1975) 4 SCC 745
156 CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57
157 (1981) 1 SCC 315

101
 PART I

168. In Sundaram Finance Ltd. v. T. Thankam, 158 this Court held:

“13. … Once it is brought to the notice of the court that its

jurisdiction has been taken away in terms of the procedure
prescribed under a special statute, the civil court should first
see whether there is ouster of jurisdiction in terms or
compliance with the procedure under the special statute. The
general law should yield to the special law—generalia
specialibus non derogant. In such a situation, the approach
shall not be to see whether there is still jurisdiction in the civil
court under the general law. Such approaches would only
delay the resolution of disputes and complicate the redressal
of grievance and of course unnecessarily increase the
pendency in the court.”

169. The following position of law emerges from these precedents:

a. The principal subject-matter as well as the particular perspective or

focus illuminate the path to ascertain whether a law is a general law or

a special law; and

b. The court should examine whether its jurisdiction has been ousted in

terms of the procedure prescribed by a special law.

170. To determine which of the three statutes that this Court is faced with is a

special law, it is necessary to first refer to their subject-matter:

a. The Stamp Act is a law governing the payment of stamp-duty for all

manner of instruments. Schedule I to the Stamp Act sets out various

types instruments which fall within the ambit of the said legislation;

158 (2015) 14 SCC 444

102
 PART I

b. The Contract Act, as the name suggests, sets out the rules in relation to

contracts in general. An arbitration agreement is one of the many

different types of contracts to which it is applicable; and

c. The Arbitration Act contains the law relating to domestic arbitration,

international commercial arbitration, the enforcement of foreign arbitral

awards, and conciliation.

171. Second, the “particular perspective” of this case pertains to whether an

unstamped arbitration agreement is rendered unenforceable pending the

payment of stamp-duty so as to interpose a bar on the referral court to refer

parties to arbitration. The issue is not whether all agreements are rendered

unenforceable under the provisions of the Stamp Act but whether arbitration

agreements in particular are unenforceable.

172. The Arbitration Act is a special law in the context of this case because it

governs the law on arbitration, including arbitration agreements – Section

2(1)(b) and Section 7 of this statute define an arbitration agreement. In

contrast, the Stamp Act defines ‘instruments’ 159 as a whole and the Contract

Act defines ‘agreements’ 160 and ‘contracts.’ 161

173. It is not only the definition of ‘arbitration agreement’ but also the other

provisions of the Arbitration Act and the purpose for which it was enacted that

makes it a special law. As observed by this Court in Bhaven Construction.

(supra), “the Arbitration Act is a code in itself.” 162 It provides for a detailed

159 Section 2(14), Stamp Act

160 Section 2(e), Contract Act
161 Section 2(h), Contract Act
162 Ibid at paragraph 12

103
 PART I

mechanism by which arbitration may be conducted, with a view to ensuring

its success as a speedy and efficacious alternative to the courts. The

Statements of Objects and Reasons of the Arbitration Act records that the

main objective of this law was to comprehensively cover international and

commercial arbitration and conciliation as also domestic arbitration and

conciliation.

b. Section 5 of the Arbitration Act

174. In the above segments, we have dealt with the scope of Section 5 of the

Arbitration Act. It restricts the extent of judicial intervention in various matters

governed by Part I of the Arbitration Act. 163 The non-obstante clause in this

provision is of particular significance. It indicates that the rule in Section 5

(and consequently, the provisions of the Arbitration Act) must take

precedence over any other law for the time being in force. Any intervention by

the courts (including impounding an agreement in which an arbitration clause

is contained) is, therefore, permitted only if the Arbitration Act provides for

such a step, which it does not. Sections 33 and 35 cannot be allowed to

operate in proceedings under Section 11 (or Section 8 as the case may be),

in view of the non-obstante clause in Section 5. This being the case, we are

unable to agree with the decision in N N Global 2 (supra), that the court in a

proceeding under section 11 must give effect to Sections 33 and 35 of the

Stamp Act despite the interdict in Section 5. The court held:

“129. Section 5 no doubt provides for a non obstante clause.

It provides against judicial interference except as provided in

CDC Financial Services (Mauritius) Ltd. v. BPL Communications Ltd., (2003) 12 SCC 140; Empire Jute
163

Co. Ltd. v. Jute Corpn. of India Ltd., (2007) 14 SCC 680; Associate Builders v. DDA, (2015) 3 SCC 49; Bhaven
Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75

104
 PART I

the Act. The non obstante clause purports to proclaim so

despite the presence of any law which may provide for
interference otherwise. However, this does not mean that the
operation of the Stamp Act, in particular, Sections 33 and 35
would not have any play. We are of the clear view that the
purport of Section 5 is not to take away the effect of Sections
33 and 35 of the Stamp Act. The Court under Section 11
purporting to give effect to Sections 33 and 35 cannot be
accused of judicial interference contrary to Section 5 of the
Act.”

175. Section 5 is effectively rendered otiose by the interpretation given to it in N N

Global 2 (supra). The court failed to provide a reason for holding that Section

5 of the Arbitration Act does not have the effect of excluding the operation of

Sections 33 and 35 of the Stamp Act in proceedings under Section 11 of the

Arbitration Act. The non-obstante clause in Section 5 does precisely this. In

addition to the effect of the non-obstante clause, the Arbitration Act is a special

law. We must also be cognizant of the fact that one of objectives of the

Arbitration Act was to minimise the supervisory role of courts in the arbitral

process. 164

176. In Hameed Joharan v. Abdul Salam, 165 this Court made the following

observations on the interplay between the Stamp Act and the Limitation Act

1963:

“38. … The intent of the legislature in engrafting the Limitation

Act shall have to be given its proper weightage. Absurdity
cannot be the outcome of interpretation by a court order and
wherever there is even a possibility of such absurdity, it would
be a plain exercise of judicial power to repel the same rather
than encouraging it. The whole purport of the Indian Stamp
Act is to make available certain dues and to collect revenue

164 Statements of Objects and Reasons, Arbitration Act

165 (2001) 7 SCC 573

105
 PART I

but it does not mean and imply overriding the effect over
another statute operating in a completely different sphere.”

c. Parliament was aware of the Stamp Act when it enacted the

Arbitration Act

177. Parliament was aware of the Stamp Act when it enacted the Arbitration Act.

Yet, the latter does not specify stamping as a pre-condition to the existence

of a valid arbitration agreement. Further, Section 11(6-A) of the Arbitration Act

requires the court to confine itself to the examination of the existence of the

arbitration agreement. This provision stands in contrast to Section 33(2) of

the Stamp Act which also uses the word “examine.” Section 33(2) requires

the person before whom an instrument is produced, to examine whether it is

stamped with a stamp of the value and description required by the law when

such instrument was executed or first executed. Although Parliament was

aware of the mandate of Section 33(2), it did not require the court acting under

Section 11 to also undertake the examination required by Section 33(2).

ii. Harmonious construction of the three statutes under consideration

a. The effect of the competence-competence doctrine

178. In A. Ayyasamy v. A. Paramasivam, 166 a two-judge Bench of this Court of

which one of us, DY Chandrachud, J, was a part emphasized that arbitration

must provide a “one-stop forum” for the resolution of disputes and held that

(a) Courts must give effect to the commercial understanding of parties to

166 (2016) 10 SCC 386

106
 PART I

arbitration agreements that arbitration is efficacious; and (b) This can be done

by minimising judicial intervention:

“48. The basic principle which must guide judicial decision-

making is that arbitration is essentially a voluntary assumption
of an obligation by contracting parties to resolve their disputes
through a private tribunal. The intent of the parties is
expressed in the terms of their agreement. Where
commercial entities and persons of business enter into
such dealings, they do so with a knowledge of the
efficacy of the arbitral process. The commercial
understanding is reflected in the terms of the agreement
between the parties. The duty of the court is to impart to
that commercial understanding a sense of business
efficacy.

53. … Jurisprudence in India must evolve towards

strengthening the institutional efficacy of arbitration.
Deference to a forum chosen by parties as a complete remedy
for resolving all their claims is but part of that evolution.
Minimising the intervention of courts is again a
recognition of the same principle.”

(emphasis supplied)

179. The decision of the majority in N N Global 2 (supra) assumes that the

inadmissibility of the document in evidence renders it unenforceable.

However, the effect of the principle of competence-competence is that the

arbitral tribunal is vested with the power and authority to determine its

enforceability. The question of enforceability survives, pending the curing of

the defect which renders the instrument inadmissible. By appointing a tribunal

or its members, this Court (or the High Courts, as the case may be) is merely

giving effect to the principle enshrined in Section 16. The appointment of an

arbitral tribunal does not necessarily mean that the agreement in which the

107
 PART I

arbitration clause is contained as well as the arbitration agreement itself are

enforceable. The arbitral tribunal will answer precisely these questions.

180. In terms of Section 10 of the Contract Act, agreements are contracts if they

are:

a. Made by the free consent of parties competent to contract;

b. For a lawful consideration;

c. With a lawful object; and

d. Not expressly declared to be void under its provisions.

181. These requirements do not affect any law in force and not expressly repealed,

which: 167

a. Requires contracts to be made in writing;

b. Requires contracts to be made in the presence of witnesses; or

c. Laws relating to the registration of documents.

182. In addition, Section 7 of the Arbitration Act specifies the requirements for the

existence of an arbitration agreement.

183. It is the arbitral tribunal and not the court which may test whether the

requirements of a valid contract and a valid arbitration agreement are met. If

the tribunal finds that these conditions are not met, it will decline to hear the

167 Section 10, Contract Act

108
 PART I

dispute any further. If it finds that a valid arbitration agreement exists, it may

assess whether the underlying agreement is a valid contract.

184. By enacting Section 16 of the Arbitration Act, Parliament has (in a manner of

speaking) permitted an agreement to arbitrate to be preliminarily enforced

even if it is only an agreement. After parties have been referred to arbitration

under Section 8 of the Arbitration Act or after the appointment of arbitrators

under Section 11 of the Arbitration Act the arbitral tribunal will have jurisdiction

to determine all questions and issues in dispute between the parties. The

legitimate concerns of the revenue in the realization of stamp duty are not

defeated because the arbitral tribunal has the jurisdiction to act in pursuance

of the provisions of the Stamp Act.

185. The corollary of the doctrine of competence-competence is that courts may

only examine whether an arbitration agreement exists on the basis of the

prima facie standard of review. The nature of objections to the jurisdiction of

an arbitral tribunal on the basis that stamp-duty has not been paid or is

inadequate is such as cannot be decided on a prima facie basis. Objections

of this kind will require a detailed consideration of evidence and submissions

and a finding as to the law as well as the facts. Obligating the court to decide

issues of stamping at the Section 8 or Section 11 stage will defeat the

legislative intent underlying the Arbitration Act.

186. The purpose of vesting courts with certain powers under Sections 8 and 11 of

the Arbitration Act is to facilitate and enable arbitration as well as to ensure

that parties comply with arbitration agreements. The disputes which have

arisen between them remain the domain of the arbitral tribunal (subject to the

109
 PART I

scope of its jurisdiction as defined by the arbitration clause). The exercise of

the jurisdiction of the courts of the country over the substantive dispute

between the parties is only possible at two stages:

a. If an application for interim measures is filed under Section 9 of the

Arbitration Act; or

b. If the award is challenged under Section 34.

Issues which concern the payment of stamp-duty fall within the remit of the

arbitral tribunal. The discussion in the preceding segments also make it

evident that courts are not required to deal with the issue of stamping at the

stage of granting interim measures under Section 9.

187. One of the intervenors, the Singapore International Arbitration Centre,

submitted that the decision in N N Global 2 (supra) reversed the prima facie

standard by observing that the court may refer a dispute to the arbitral tribunal

if objections as to its being duly stamped are “on the face of it, wholly without

foundation.” We agree with this submission.

188. Once the arbitral tribunal has been appointed, it will act in accordance with

law and proceed to impound the agreement under Section 33 of the Stamp

Act if it sees fit to do so. It has the authority to receive evidence by consent of

the parties, in terms of Section 35. The procedure under Section 35 may be

followed thereafter. In this manner, the competence-competence doctrine is

given life and arbitration proceedings can continue to remain a faster

alternative to suits before the trial courts or other, similar actions.

110
 PART I

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

Act

189. Sections 33 and 35 of the Stamp Act use the word “shall.” While this ordinarily

indicates that the provision is mandatory, it may be read as directory. In Sainik

Motors v. State of Rajasthan, 168 this Court held:

“The word ‘shall’ is ordinarily mandatory, but it is sometimes

not so interpreted if the context or the intention otherwise
demands.”

190. In State of U.P. v. Babu Ram Upadhya,169 this Court held that the principles

for the construction of statutes which used the mandatory word “shall” were

as follows:

“29. The relevant rules of interpretation may be briefly stated

thus : When a statute uses the word “shall”, prima facie, it is
mandatory, but the Court may ascertain the real intention of
the legislature by carefully attending to the whole scope of the
statute. For ascertaining the real intention of the Legislature
the Court may consider, inter alia, the nature and the design
of the statute, and the consequences which would follow from
construing it the one way or the other, the impact of other
provisions whereby the necessity of complying with the
provisions in question is avoided, the circumstance, namely,
that the statute provides for a contingency of the non-
compliance with the provisions, the fact that the non-
compliance with the provisions is or is not visited by some
penalty, the serious or trivial consequences that flow
therefrom, and, above all, whether the object of the legislation
will be defeated or furthered.”

168 1961 SCC OnLine SC 15

169 1960 SCC OnLine SC 5

111
 PART I

191. This Court must therefore interpret Sections 33 and 35 to assess whether

they are mandatory in relation to a court presiding over proceedings under

Section 8 or Section 11 by examining:

a. Whether the context indicates that the provision is directory;

b. The scope of the statute;

c. The nature and design of the statute;

d. The consequences which would follow from construing it one way or

another;

e. The impact of other provisions;

f. The consequences of non-compliance; and

g. Whether the object of the legislation will be furthered or destroyed.

192. The decisions adverted to in the preceding paragraphs were delivered in the

context of a single provision in a single statute. Additional factors must be

considered in cases such as the present one, where multiple statutes appear

to operate in relation to a single issue (or a single agreement such as the

arbitration agreement in the present case). To this list of considerations which

must animate the court’s evaluation of whether a provision is mandatory or

directory, we would add that the scope, nature, and design of all the statutes

which appear to operate simultaneously must be considered. Their interplay

and the intention of the legislature must be evaluated in the context of all such

statutes. The question of whether the object(s) of the applicable legislation(s)

112
 PART I

will be furthered or destroyed must also be considered in view of all such

statutes.

c. The object of the Stamp Act is preserved

193. In N N Global 2 (supra), the majority judgment observed as follows:

“92. While the Stamp Act is a fiscal enactment intended to

raise revenue, it is a law, which is meant to have teeth. The
point of time, at which the stamp duty is to be paid is expressly
provided for in Section 17 of the Stamp Act. There cannot be
any gainsaying, that call it a fiscal enactment, it is intended
that it is to be implemented with full vigour. The duty of a Court
must be to adopt an interpretation which results in the
enforcement of the law, rather than allowing the law to be
flouted with impunity. Once this principle is borne in mind, the
task of the Court becomes less difficult.”

194. The interpretation accorded to the Stamp Act by this Court in the present

judgment does not allow the law to be flouted. The arbitral tribunal continues

to be bound by the provisions of the Stamp Act, including those relating to its

impounding and admissibility. The interpretation of the law in this judgment

ensures that the provisions of the Arbitration Act are given effect to while not

detracting from the purpose of the Stamp Act.

195. The interests of revenue are not jeopardised in any manner because the duty

chargeable must be paid before the agreement in question is rendered

admissible and the lis between the parties adjudicated. The question is at

which stage the agreement would be impounded and not whether it would be

impounded at all. The courts are not abdicating their duty but are instead

giving effect to:

a. The principle of minimal judicial intervention in Section 5 of the

Arbitration Act;

113
 PART I

b. The prima facie standard applicable to Sections 8 and 11 of the

Arbitration Act; and

c. The purpose of the Stamp Act which is to protect the interests of revenue

and not arm litigants with a weapon of technicality by which they delay

the adjudication of the lis.

d. The interpretation of the law must give effect to the purpose of the

Arbitration Act in addition to the Stamp Act

196. The decision of the Constitution Bench in N N Global 2 (supra) gives effect

exclusively to the purpose of Stamp Act. It prioritises the objective of the

Stamp Act, i.e., to collect revenue at the cost of the Arbitration Act. As

discussed previously, the purpose of the Arbitration Act is to ensure that a

speedy and efficacious alternative dispute resolution system is available to

parties both commercial and otherwise. This purpose is in danger of being

undermined by the interpretation accorded to the Stamp Act in N N Global 2

(supra). The impounding of an agreement which contains an arbitration

clause at the stage of the appointment of an arbitrator under Section 11 (or

Section 8 as the case may be) of the Arbitration Act will delay the

commencement of arbitration. It is a well-known fact that courts are burdened

with innumerable cases on their docket. This has the inevitable consequence

of delaying the speed at which each case progresses. Arbitral tribunals, on

the other hand, deal with a smaller volume of cases. They are able to dedicate

extended periods of time to the adjudication of a single case before them. If

an agreement is impounded by the arbitral tribunal in a particular case, it is

114
 PART J

far likelier that the process of payment of stamp-duty and a penalty (if any)

and the other procedures under the Stamp Act are completed at a quicker

pace than before courts.

J. SMS Tea Estates and Garware Wall Ropes were wrongly decided

i. SMS Tea Estates

197. The genesis of the present issue stems from a two-Judge Bench decision of

this Court in SMS Tea Estates (supra). In that case, the appellant and

respondent executed a lease deed with respect to two tea estates in favor of

the appellant. The lease deed provided for the settlement of disputes between

the parties by arbitration. When the appellant sought to invoke the arbitration

clause, the respondent opposed the same on the ground that the lease deed

was unregistered and not duly stamped, and was therefore invalid,

unenforceable, and not binding. The High Court dismissed the appellant’s

application for the appointment of an arbitrator. On appeal, inter alia the

following issues came for consideration before this Court: first, whether an

arbitration agreement contained in an unregistered (but compulsorily

registerable) instrument is valid and enforceable; and second, whether an

arbitration agreement in an unregistered instrument which is not duly

stamped, is valid and enforceable.

198. With regard to the first issue, the Court analysed Section 49 of the

Registration Act. Section 49 of the Registration Act provides that an

unregistered document cannot be received as evidence of any transaction

affecting such property or conferring such power unless it has been

115
 PART J

registered. However, the proviso to Section 49 provides that an unregistered

instrument can be used as evidence of any collateral transaction not required

to be effected by such instrument. In view of the aforesaid provision, this Court

held that an arbitration agreement contained in an unregistered instrument is

a collateral term relating to the resolution of disputes, which was unrelated to

the performance of the contract. Therefore, it was held that an arbitration

agreement contained in an unregistered but compulsorily registerable

document can be acted upon and enforced for the purpose of dispute

resolution by arbitration.

199. With regard to the second issue, it was noted that Section 35 of the Stamp

Act does not contain a proviso like Section 49 of the Registration Act enabling

the unstamped instrument to be used for a collateral purpose. Thereafter, this

Court observed that Section 33 casts a duty upon every court, as also an

arbitrator, before whom an unregistered instrument chargeable with stamp

duty is produced to examine the instrument in order to ascertain whether it is

duly stamped. If the Court or arbitrator comes to the conclusion that the

instrument is not duly stamped, it has to necessarily impound the document.

The Court laid down the procedure to be adopted when an arbitration is

contained in a document which is not duly stamped in the following terms:

a. The Court should, before admitting any document into evidence or acting

upon such document, examine whether the instrument/ document is duly

stamped and whether it is an instrument which is compulsorily registerable.

b. If the document is found to be not duly stamped, Section 35 of the Stamp

Act bars the said document being acted upon. Consequently, even the

116
 PART J

arbitration clause therein cannot be acted upon. The court should then

proceed to impound the document under Section 33 of the Stamp Act and

follow the procedure under Sections 35 and 38 of the Stamp Act.

c. If the document is found to be duly stamped, or if the deficit stamp duty and

penalty is paid, either before the court or before the Collector (as

contemplated in Section 35 of Section 49 of the Stamp Act), and the defect

with reference to deficit duty is cured, the court may treat the document as

duly stamped.

200. SMS Tea Estates (supra) allowed the courts to impound the document under

Section 33 of the Stamp Act at the Section 11 stage. Thus, the courts were

mandated to intervene at the pre-arbitral stage before the arbitral tribunal

could assume jurisdiction. SMS Tea Estates (supra) was decided in 2011. At

that time, Patel Engineering (supra) and Boghara Polyfab (supra) held the

field, which held that the referral courts had wide powers to decide a large

number of preliminary issues, including the existence and validity of

arbitration agreements. As discussed in the segments above, the Law

Commission of India recommended amendments to Sections 8 and 11 with a

view to restrict the scope of the judicial intervention “to situations where the

Court/Judicial Authority finds that the arbitration agreement does not exist or

is null and void.”

201. Pursuant to the recommendations of the Law Commission of India,

Parliament incorporated Section 11(6A) which clarified that the scope of

judicial intervention was limited to the examination of the existence of an

arbitration agreement. The legislative note on Clause 11(6A) states that

117
 PART J

“[s]ub-section (6A) is inserted to provide that the Supreme Court or the High

Court while considering applications under sub-section (4) to (6) shall confine

to the examination of an arbitration agreement.” More importantly, the said

provision contains a non-obstante clause which reads: “notwithstanding any

judgment, decree or order of any Court.”

202. In Emmar MGF Land Ltd. v. Aftab Singh, 170 this Court was examining the

purport of Section 8 which included a similar non-obstante clause as

contained in Section 11(6A). This Court explained the purpose of the non-

obstante clause contained in Section 8 in the following terms:

“52. […] The words “notwithstanding any judgment, decree or

order of the Supreme Court or any court” added by
amendment in Section 8 were with intent to minimise the
intervention of judicial authority in the context of arbitration
agreement. As per the amended Section 8(1), the judicial
authority has only to consider the question “whether the
parties have a valid arbitration agreement?” The Court cannot
refuse to refer the parties to arbitration “unless it finds that
prima facie no valid arbitration agreement exists”. The
amended provision, thus, limits the intervention by judicial
authority to only one aspect i.e. refusal by judicial authority to
refer is confined to only one aspect, when it finds that prima
facie no valid arbitration agreement exists.”

203. In Emmar MGF Land (supra), this Court clarified that the expression

“notwithstanding any judgment” referred to in Section 8(1) relates to those

judicial precedents which explained the discretion and power of judicial

authority to examine various aspects while exercising powers under Section

8. In a similar vein, Section 11(6A) intended to minimize judicial interference

to the examination of the existence of an arbitration agreement. Accordingly,

170 (2019) 12 SCC 751

118
 PART J

the non-obstante clause contained in Section 11(6A) pertains to those judicial

precedents which delved into the discretion and power of referral courts to

intervene and examine the existence and validity of an arbitration agreement

at the Section 11 stage. This includes SMS Tea Estates (supra) considering

the fact that it mandated the referral court to judicially intervene in the

arbitration process by impounding the unstamped instrument containing the

arbitration agreement. Therefore, we hold that Section 11(6A) also

legislatively altered the basis of SMS Tea Estates (supra) to the extent that it

dealt with judicial intervention at the Section 11 stage.

ii. Garware Wall Ropes

204. In Garware Wall Ropes (supra), a Bench of two Judges of this Court was

called upon to decide the effect of an arbitration clause contained in a contract

which requires to be stamped. Since SMS Tea Estates (supra) was decided

before the introduction of Section 11(6A) of the Arbitration Act, another

pertinent issue before this Court was whether introduction of this provision

removed the basis for the decision in SMS Tea Estates (supra) to the extent

that an unstamped instrument could be impounded not by the referral court

under Section 11 but by the arbitrator. This Court held that the referral court

under Section 11(6A) would be bound by the mandatory provisions of the

Stamp Act to examine and impound the unstamped instrument. It was further

observed that since the Stamp Act applied to the instrument as a whole, it

was not possible to bifurcate the arbitration clause contained in such

instrument and give it an independent existence.

119
 PART J

205. This Court in Garware Wall Ropes (supra) further analysed the purport of the

word “existence” contained in Section 11 of the Arbitration Act. It was held that

an arbitration agreement contained in an unstamped instrument would not

exist in law. The relevant paragraph is extracted below:

“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 has, in no
manner, been touched by the amendment of Section 11(6-A).”

206. Further, this Court noted Section 11(13) of the Arbitration Act which provides

a timeline of sixty days for disposal of any application for appointment of an

arbitrator. In view of Section 11(13), this Court held that the provisions of the

Stamp Act and the Arbitration Act need to be harmoniously construed.

Accordingly, the Court held that once the High Court impounds an unstamped

instrument at the Section 11 stage, it shall hand it over to the relevant authority

under the Maharashtra Stamp Act to be decided within a period of forty-five

days from which such authority receives the instrument. Once the stamp duty

and penalty was paid, the High Court could proceed expeditiously to hear and

dispose of the Section 11 application.

207. The conclusions of this Court in Garware Wall Ropes (supra) can be

summarized as follows: first, there was no legislative intent to overrule SMS

Tea Estates (supra) because neither the Statement of Objects and Reasons

120
 PART J

of the 2015 Amendment Act nor the Law Commission of India Report, 2014

mentions it; second, the referral court at the Section 11 stage is only giving

effect to the provisions of the Stamp Act and not deciding any preliminary

issues between the parties; third, the separability presumption could only be

applied for limited purposes. Since the Stamp Act applies to the instrument

as a whole, it is not possible to bifurcate the arbitration clause contained in

such agreement; and fourth, an arbitration clause in an unstamped contract

would not exist, leading to the conclusion that Section 11(6A) has not

overruled SMS Tea Estates (supra).

208. The Statement of Objects and Reasons of the 2015 Amendment Act are as

follows:

“(iii) an application for appointment of an arbitrator shall be

disposed of by the High Court or Supreme Court, as the case
may be, as expeditiously as possible and an endeavour
should be made to dispose of the matter within a period of
sixty days.

“(iv) to provide that while considering any application for

appointment of arbitrator, the High Court or the Supreme
Court shall examine the existence of a prima facie arbitration
agreement and not other issues.”

209. The above extract indicates that the Supreme Court or High Court at the stage

of the appointment of an arbitrator shall “examine the existence of a prima

facie arbitration agreement and not other issues”. These other issues not

only pertain to the validity of the arbitration agreement, but also include any

other issues which are a consequence of unnecessary judicial interference in

the arbitration proceedings. Accordingly, the “other issues” also include

121
 PART J

examination and impounding of an unstamped instrument by the referral court

at the Section 8 or Section 11 stage. The process of examination, impounding,

and dealing with an unstamped instrument under the Stamp Act is not a time-

bound process, and therefore does not align with the stated goal of the

Arbitration Act to ensure expeditious and time-bound appointment of

arbitrators. Therefore, even though the Law Commission of India Report or

the Statement of Objects and Reasons of the 2015 Amendment Act do not

specifically refer to SMS Tea Estates (supra), it nevertheless does not make

any difference to the position of law as has been set out above.

210. Garware Wall Ropes (supra) relied on Patel Engineering (supra) to observe

that “it is difficult to accede to the argument made by the learned counsel on

behalf of the respondent that Section 16 makes it clear that an arbitration

agreement has an independent existence of its own, and must be applied

while deciding an application under Section 11 of the 1996 Act.” In view of this

observation, it was held that the separability presumption cannot be applied

in case of an unstamped instrument because the Stamp Act applies to the

instrument as a whole. As discussed in the preceding segments, the

separability presumption ensures the validity of an arbitration agreement

notwithstanding the invalidity, illegality, or non-existence of the underlying

contract.

211. The scope of authority of an arbitral tribunal under Section 16 is wide because

it can deal with issues pertaining to the existence and validity of an arbitration

agreement. In his dissenting opinion in NN Global 2 (supra), Justice Roy

correctly observes that since “[s]ection 16 specifically deals with both

122
 PART J

existence and validity whereas Section 11 only deals with existence, the

former should be given more weight.” This observation comports with the

stated goal of the Arbitration Act to minimize the supervisory role of courts in

the arbitral process. Post the 2015 Amendment Act the referral courts are only

required to prima facie determine the existence or validity of an arbitration

agreement. The basis for such prima facie determination lies in the fact that

the arbitral tribunal will later have the competence to rule on the issue of

existence and validity of the arbitration agreement. Therefore, the separability

presumption applies at the referral stage.

212. In Intercontinental Hotels Group (India) (P) Ltd v. Waterline Hotels (P)

Ltd., 171 the issue before a Bench of three Judges of this Court in a Section 11

application was: whether the court can proceed to appoint an arbitrator when

the underlying contract is incorrectly stamped. In that case, it was observed

that although “stamp duty has been paid, whether it be insufficient or

appropriate is a question that may be answered at a later stage as this Court

cannot review or go into this aspect under Section 11(6).”

213. The discussion in preceding segments has held that non-stamping or

insufficient stamping of an instrument does not render it invalid or non-

existent. Therefore, paragraphs 22 and 29 of Garware Wall Ropes (supra),

which held that an arbitration agreement contained in an unstamped or

insufficiently stamped contract would be non-existent in law, does not set forth

the correct position of law.

171 (2022) 7 SCC 662

123
 PART K

K. The Appointment of Arbitrators by the Chief Justice of India Scheme, 1996

214. In N N Global 2 (supra), the majority considered the Appointment of

Arbitrators by the Chief Justice of India Scheme, 1996. 172 Para 2 of the 1996

Scheme reads as follows:

“2. Submission of request.- The request to the Chief Justice under

sub-section (4) or sub-section (5) or sub-section (6) of section 11
shall be made in writing and shall be accompanied by-

(a) the original arbitration agreement or a duly certified copy thereof;

The 1996 Scheme provides that an application under Section 11 for the

appointment of an arbitrator shall be accompanied by the original arbitration

agreement or a duly certified copy.

215. In SMS Tea Estates (supra), it was observed that a certified copy of the

agreement/ contract/ instrument containing the arbitration clause should

disclose the stamp duty that has been paid on the original. N N Global 2

(supra) has endorsed this view. In that case, this Court further referred to

paragraph 5 of the 1996 Scheme which allows the Chief Justice or the person

or the institution designated by him under para 3 to seek further information

or clarification from the party making request under the Scheme.

Consequently, it was held that a Judge dealing with an application under

Section 11 could seek further clarification or information with respect to the

172 “1996 Scheme”

124
 PART K

payment of stamp duty to satisfy the requirements as laid down in SMS Tea

Estates (supra).

216. N N Global 2 (supra) also refers to the two-Judge Bench decision of this Court

in Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao 173 where it was held

that Section 35 of the Stamp Act renders any secondary evidence of an

unstamped or insufficiently stamped instrument inadmissible in evidence. It

was further held that any secondary evidence of such instrument cannot be

acted upon in terms of Section 35. Subsequently, a three-Judge Bench of this

Court in Hariom Agrawal v. Prakash Chand Malviya174 affirmed Jupudi

Kesava Rao (supra) by observing that Sections 33 and 35 of the Stamp Act

are not concerned with any copy of the instrument. The relevant paragraph is

extracted below:

“10. It is clear from the decisions of this Court and a plain

reading of Sections 33, 35 and 2(14) of the Act that an
instrument which is not duly stamped can be impounded
and when the required fee and penalty has been paid for
such instrument it can be taken in evidence under Section
35 of the Stamp Act. Sections 33 or 35 are not concerned
with any copy of the instrument and party can only be
allowed to rely on the document which is an instrument
within the meaning of Section 2(14). There is no scope for
the inclusion of the copy of the document for the purposes
of the Stamp Act. Law is now no doubt well settled that
copy of the instrument cannot be validated by impounding
and this cannot be admitted as secondary evidence under
the Stamp Act, 1899.”

173 (1971) 1 SCC 545

174 (2007) 8 SCC 514

125
 PART L

217. An arbitration agreement or its certified copy is not rendered void or

unenforceable because it is unstamped or insufficiently stamped. We

accordingly clarify that the position of law laid down in Jupudi Kesava Rao

(supra) and Hariom Agrawal (supra) cannot constrain a referral court at

Section 11 stage (as well as Section 8 stage) from acting upon a certified copy

of an arbitration agreement and referring the parties to arbitral tribunal.

218. The discussion in preceding segments indicates that the referral court at

Section 11 stage should not examine or impound an unstamped or

insufficiently stamped instrument, but rather leave it for the determination by

the arbitral tribunal. When a party produces an arbitration agreement or its

certified copy, the referral court only has to examine whether an arbitration

agreement exists in terms of Section 7 of the Arbitration Act. The referral court

under Section 11 is not required to examine whether a certified copy of the

agreement/ instrument/ contract discloses the fact of payment of stamp duty

on the original. Accordingly, we hold that the holding of this Court in SMS Tea

Estate (supra), as reiterated in N N Global 2 (supra), is no longer valid in law.

L. Vidya Drolia does not deal with the issue of stamping

219. The genesis of these proceedings lies in N N Global 1 (supra) doubting the

correctness of the finding in Vidya Drolia (supra). N N Global 1 (supra)

doubted the correctness of the view taken in paragraphs 146 and 147 of the

126
 PART L

co-ordinate Bench in Vidya Drolia (supra), where the three-Judge Bench

relied on Garware Wall Ropes (supra).

220. In paragraph 146, this Court was dealing with the issue of whether the

expression “existence” as contained in Section 11(6A) also presupposes the

validity of an arbitration agreement. The Court answered this proposition by

observing that an arbitration agreement “exists” only when it is valid and

enforceable. Accordingly, it was held that existence of an arbitration

agreement means an arbitration agreement which satisfies the requirements

of both the Arbitration Act and the Contract Act. In the succeeding paragraphs,

this Court sought to reinforce its conclusion. In the process, it referred to

various precedents of this Court including Garware Wall Ropes (supra).

221. Paragraph 147.1 clarifies that it is referring to Garware Wall Ropes (supra)

only for the purposes of establishing the correlation between existence and

validity of an arbitration agreement. The relevant paragraph of Garware Wall

Ropes (supra) refers to United India Insurance Co. Ltd. v. Hyundai Engg.

& Construction Co. Ltd. 175 in which the arbitration clause was triggered only

if one of the parties admitted or accepted its liability. In that case, since the

relevant party (the insurer) did not accept its liability, the court held that the

arbitration clause did not exist in law although it existed in fact. Garware Wall

Ropes (supra) relied on Hyundai Engg. (supra) to hold, albeit incorrectly,

that an unstamped agreement would not exist as a matter of law until the

underlying instrument is duly stamped. We are of the opinion that Vidya

Drolia (supra) did not, in any manner, determine the effect of an unstamped

175 (2018) 17 SCC 607

127
 PART L

or insufficiently stamped underlying contract on an arbitration agreement. It

referred to Garware Wall Ropes (supra) only to buttress its interpretation that

an arbitration agreement does not exist if it is invalid or illegal, which has been

clarified in the above segments of this judgment.

222. Significantly, a two-Judge Bench of this Court in Career Institute

Educational Society v. Om Shree Thakurji Educational Society176 clarified

that Vidya Drolia (supra) referred to Garware Wall Ropes (supra) only “to

interpret the word ‘existence’, and whether an ‘invalid’ arbitration agreement

can be said to exist” The two-Judge Bench further clarified that Vidya Drolia

(supra) did not decide the issue of the effect of an unstamped or insufficiently

stamped underlying contract on the arbitration clause. The relevant extract is

as follows:

“3. The judgement in Vidya Drolia v. Durga Trading

Corporation did not examine and decide the issue of effect of
unstamped or under-stamped underlying contract on the
arbitration agreement. As this issue and question has not
been decided in Vidya Drolia (supra), the decision is not a
precedent on this question.”

223. We agree with these observations in Career Institute Educational Society

(supra). Vidya Drolia (supra) did not deal with the issue of the effect of an

unstamped or insufficiently stamped instrument on the existence or validity of

an arbitration agreement. Therefore, the reasoning in Vidya Drolia (supra)

does not lead to the conclusion that Garware Wall Ropes (supra) was rightly

176 2023 SCC OnLine SC 586

128
 PART M

decided either on the aspect of examination and impounding of unstamped

or insufficiently stamped instrument with respect to arbitration proceedings,

or the validity of on arbitration agreement contained in an unstamped or

insufficiently stamped underlying contract.

M. Conclusions

224. The conclusions reached in this judgment are summarised below:

a. Agreements which are not stamped or are inadequately stamped are

inadmissible in evidence under Section 35 of the Stamp Act. Such

agreements are not rendered void or void ab initio or unenforceable;

b. Non-stamping or inadequate stamping is a curable defect;

c. An objection as to stamping does not fall for determination under

Sections 8 or 11 of the Arbitration Act. The concerned court must

examine whether the arbitration agreement prima facie exists;

d. Any objections in relation to the stamping of the agreement fall within the

ambit of the arbitral tribunal; and

e. The decision in NN Global 2 (supra) and SMS Tea Estates (supra) are

overruled. Paragraphs 22 and 29 of Garware Wall Ropes (supra) are

overruled to that extent.

129
 PART M

225. The Registry is directed to take administrative directions from Hon’ble Chief

Justice of India for placing the matters before an appropriate Bench.

…….……………………………………CJI
[Dr Dhananjaya Y Chandrachud]

…….………………………………………J
[Sanjay Kishan Kaul]

…….………………………………………J
[B R Gavai]

.……………………………………………J
[Surya Kant]

.……………………………………………J
[J B Pardiwala]

.……………………………………………J
[Manoj Misra]

New Delhi;
December 13, 2023

130
 REPORTABLE

IN THE SUPREME COURT OF INDIA

INHERENT JURISDICTION

CURATIVE PETITION (CIVIL) NO. 44 OF 2023

IN
REVIEW PETITION (CIVIL) NO. 704 OF 2021
IN
CIVIL APPEAL NO. 1599 OF 2020

IN RE.: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER

THE ARBITRATION AND CONCILIATION ACT, 1996 AND THE
INDIAN STAMP ACT, 1899

WITH

ARBITRATION PETITION NO. 25 OF 2023

JUDGMENT
SANJIV KHANNA, J.

I respectfully agree with the view expressed by the Hon’ble the

Chief Justice of India Dr. D.Y. Chandrachud in his elaborate exposition

of the different contours which arise for consideration in the present

reference. Complementing the same, I would like to provide additional

justifications for the final conclusion, viz., unstamped or insufficiently

stamped instruments inadmissible in evidence in terms of Section 35 of

the Indian Stamp Act, 18991, 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

1 For short, “the Stamp Act”.

Curative Petition (C) No. 44 of 2023 and Anr. Page 1 of 25

 existence of arbitration agreement”, is applied by the courts while

deciding applications under Sections 82 or 113 of the Arbitration and

2 8. Power to refer parties to arbitration where there is an arbitration agreement.—(1) A judicial

authority, before which an action is brought in a matter which is the subject of an arbitration agreement
shall, if a party to the arbitration agreement or any person claiming through or under him, so applies
not later than the date of submitting his first statement on the substance of the dispute, then,
notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to
arbitration unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by
the original arbitration agreement or a duly certified copy thereof.
Provided that where the original arbitration agreement or a certified copy thereof is not available with
the party applying for reference to arbitration under sub-section (1), and the said agreement or certified
copy is retained by the other party to that agreement, then, the party so applying shall file such
application along with a copy of the arbitration agreement and a petition praying the court to call upon
the other party to produce the original arbitration agreement or its duly certified copy before that court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is
pending before the judicial authority, an arbitration may be commenced or continued and an arbitral
award made.
3 11. Appointment of arbitrators.—(1) A person of any nationality may be an arbitrator, unless

otherwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator
or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each
party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator
who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so
from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of
their appointment,
the appointment shall be made, upon request of a party, by 1[the Supreme Court or, as the case may
be, the High Court or any person or institution designated by such Court];
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the
parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the
other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court
or, as the case may be, the High Court or any person or institution designated by such Court.
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under
that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that
procedure,
a party may request the Supreme Court or, as the case may be, the High Court or any person or
institution designated by such Court to take the necessary measure, unless the agreement on the
appointment procedure provides other means for securing the appointment.
(6A) 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.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the
High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by
the Supreme Court or the High Court.

Curative Petition (C) No. 44 of 2023 and Anr. Page 2 of 25

 Conciliation Act, 19964; and an objection as to insufficient stamping of

the underlying agreement can be examined and decided by the arbitral

tribunal. Accordingly, the majority decision of the Constitution Bench in

N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.5 should be

overruled.

(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the
Supreme Court or, as the case may be, the High Court or the person or institution designated by such
Court is final and no appeal including Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated
by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective
arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment
of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the
Supreme Court or the person or institution designated by that Court] may appoint an arbitrator of a
nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said
Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5)
or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-
section (6) to the Chief Justices of different High Courts or their designates, different High Courts or
their designates, the High Court or its designate to whom the request has been first made] under the
relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in
an international commercial arbitration, the reference to the “Supreme Court or, as the case may be,
the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any
other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those
sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal
Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court
itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or arbitrators shall be
disposed of by the Supreme Court or the High Court or the person or institution designated by such
Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose
of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment
to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into
consideration the rates specified in the Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to
international commercial arbitration and in arbitrations (other than international commercial arbitration)
in case where parties have agreed for determination of fees as per the rules of an arbitral institution.
4 For short, “the Arbitration Act”.
5 (2023) 7 SCC 1.

Curative Petition (C) No. 44 of 2023 and Anr. Page 3 of 25

2. The judgment authored by Hon’ble the Chief Justice, under the heading

‘D. Indian Stamp Act, 1899’, gives an overall view of the Stamp Act, and

the procedures it prescribes. It also refers to Sections 33, 35 and 36 of

the Stamp Act, which I would like to elaborate on and elucidate.

3. Sections 33 and 35 of the Stamp Act are reproduced for reference:

“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.”

xx xx xx

Curative Petition (C) No. 44 of 2023 and Anr. Page 4 of 25

 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 authenticated
by any such person or by any public officer, unless such
instruments 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.”

4. Section 33 of the Stamp Act is cautiously worded, to not overexpand its

ambit and scope. The section applies on production of an instrument

before a person who by law or consent of the parties has the authority to

receive evidence.6 It also applies when an instrument is produced before

6 Hereinafter also referred to as ‘such person’.

Curative Petition (C) No. 44 of 2023 and Anr. Page 5 of 25

 a person in charge of a public office. Production of the instrument must

be during the course of performance of functions by such person or

public officer. The proviso states that Section 33 shall not be deemed to

require any Magistrate or Judge of a criminal court to examine or

impound an instrument if he does not think fit to do so, except in

proceedings under Chapter XII or Chapter XXXVI of the Code of Criminal

Procedure, 1898 (Chapter X(D) and Chapter IX of the Code of Criminal

Procedure, 1973). Police officers are not public officers under Section 33

of the Stamp Act.

5. Sub-section (3) to Section 33 states that in case of doubt, the State

Government may determine which offices shall be deemed to be public

offices and who shall be deemed to be persons in charge of the public

offices.

6. Sub-section (2) to Section 33 states that for the purpose of sub-section

(1), such person or public officer shall examine the instrument so

chargeable and so produced or coming before him, in order to ascertain

whether it is duly stamped as per the law in force in India when the

instrument was executed or first executed.

7. Section 35 states that an instrument not duly stamped and chargeable

with duty shall not be admitted in evidence by any person having by law

or by consent of the parties the authority to receive evidence. The words

“for any purpose” mean that the instrument cannot be relied upon for a

Curative Petition (C) No. 44 of 2023 and Anr. Page 6 of 25

 collateral purpose either. Further, the instrument shall not be acted

upon, registered or authenticated by such person or by any public officer,

unless it is duly stamped. The words ‘acted upon’ are with reference to

the acts or the proceedings before such officer or public officer, as the

case may be.

8. Section 35 permits admission of an unstamped or under-stamped

instrument after the same instrument is duly stamped. Proviso (a)

requires payment of the chargeable duty and penalty, before an

insufficiently stamped instrument is admitted in evidence, or is acted

upon, registered or authenticated.

9. Section 40(1)(b) of the Stamp Act provides for payment of proper duty if

the instrument impounded is not duly stamped. Section 42(1) provides

for certifying that proper duty has been paid on the impounded

instrument. Sub-section (2) of Section 42 provides that after certification

the instrument shall be admissible in evidence, and may be registered,

acted upon and authenticated as if it has been duly stamped.

10. Sections 33 and 35 do not apply when an instrument is produced or is

acted upon by the parties themselves, or by a person who does not have

authority by law or by consent of the parties to receive evidence, or a

person who is not a public officer. Sections 33 does not authorise a police

officer to examine and impound an instrument, even when insufficiently

stamped. A Magistrate or a Judge of a criminal court may not examine

Curative Petition (C) No. 44 of 2023 and Anr. Page 7 of 25

 or impound an instrument coming before him, and can admit an

insufficiently stamped instrument in evidence, other than in the

proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal

Procedure, 1898 (Chapter X(D) and Chapter IX of the Code of Criminal

Procedure, 1973). Thus, the same instrument may be admissible and

acted upon before a criminal court, while being inadmissible before a civil

court, public officer etc.

11. The negative stipulations in Sections 33 and 35 are specific, albeit not

so absolute as to make the instrument invalid in law. A “void ab initio”

instrument, which is stillborn, has no corporeality in the eyes of law. It

cannot confer or give rights, or create obligations. However, an

instrument which is “inadmissible” exists in law, albeit cannot be admitted

in evidence by such person, or be registered, authenticated or be acted

upon by such person or a public officer till it is duly stamped. As rightly

observed by Hon’ble the Chief Justice, Section 35 deals with

admissibility etc. of an instrument and not invalidity.

12. Section 36 of the Stamp Act refers to the situation where the admission

of an instrument is not to be questioned, and reads:

“36. Admission of instrument where not to be

questioned.—Where an instrument has been admitted in
evidence, such admission shall not, except as provided in
Section 61, be called in question at any stage of the same
suit or proceeding on the ground that the instrument has not
been duly stamped.”

Curative Petition (C) No. 44 of 2023 and Anr. Page 8 of 25

 Thus, where an instrument has been admitted in evidence, such

admission shall not be called in question, except as provided in Section

61, at any stage of the same suit or proceedings on the ground that the

instrument is not duly stamped. Consequently, where an instrument has

been admitted in evidence, such instrument cannot be impounded as it

cannot be called in question at any stage of the same suit or proceeding

on the ground of insufficient stamping.

13. An instrument which is void ab initio or void, cannot be validated by mere

consent or waiver, unless consent or wavier undoes the cause of

invalidity. On the other hand, Section 36 of the Stamp Act incorporates

the doctrine of waiver, estoppel and implied consent. That apart, after

due stamping as per the Stamp Act, the unstamped or insufficiently

stamped instrument can be admitted in evidence, or be registered,

authenticated or be acted upon by such person or public officer.

14. This has long been a recognised position of law, as accepted by this

Court in several decisions, which I would like to refer to.

15. In Javer Chand and Others. v. Pukhraj Surana7, way back in 1961, a

four Judges’ Bench of this Court had examined the interplay between

Sections 35 and 36 of the Stamp Act to hold that Section 36 is categorical

in terms that when a document has been admitted in evidence, such

admission cannot be called in question at any stage of the suit or

7 AIR 1961 SC 1655.

Curative Petition (C) No. 44 of 2023 and Anr. Page 9 of 25

 proceedings on the ground that the instrument had not been duly

stamped. The only exception recognised by Section 36 is the class of

cases contemplated by Section 61 of the Stamp Act. Section 36 does

not admit of any other exception. It does not matter whether the court

has wrongly decided to admit the document in evidence. Section 35 is in

the nature of a penal provision which has far reaching effects. The

parties to the litigation have to be circumspect and have to be alert so as

to challenge the admissibility of an instrument before it is admitted in

evidence.

16. A five Judges’ Bench in The State of Bihar v. M/s Karam Chand Thapar

and Brothers Ltd.8, has held that the instrument that can be validated

under Section 35 is only the original, when it is unstamped or

insufficiently stamped. A copy cannot be validated and acted upon, albeit

where multiple copies are prepared and signed and sent to respective

parties, each one would be an original instrument.

17. In Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao and Others9,

a two Judges’ Bench of this Court observed that The Indian Evidence

Act, 1872 does not purport to deal with admissibility of the documents

which are required to be stamped under the provisions of the Stamp Act.

Thereafter, it is observed:

“13. The first limb of Section 35 clearly shuts out from

evidence any instrument chargeable with duty unless it is
duly stamped. The second limb of it which relates to acting

8 AIR 1962 SC 110.

9 (1971) 1 SCC 545.

Curative Petition (C) No. 44 of 2023 and Anr. Page 10 of 25

 upon the instrument will obviously shut out any secondary
evidence of such instrument, for allowing such evidence
to be let in when the original admittedly chargeable with
duty was not stamped or insufficiently stamped, would be
tantamount to the document being acted upon by the
person having by law or authority to receive evidence.
Proviso (a) is only applicable when the original instrument
is actually before the Court of law and the deficiency in
stamp with penalty is paid by the party seeking to rely
upon the document. Clearly secondary evidence either by
way of oral evidence of the contents of the unstamped
document or the copy of it covered by Section 63 of the
Indian Evidence Act would not fulfil the requirements of
the proviso which enjoins upon the authority to receive
nothing in evidence except the instrument itself. Section
25 is not concerned with any copy of an instrument and a
party can only be allowed to rely on a document which is
an instrument for the purpose of Section 35. “Instrument”
is defined in Section 2(14) as including every document by
which any right or liability is, or purports to be created,
transferred, limited, extended, extinguished or recorded.
There is no scope for inclusion of a copy of a document as
an instrument for the purpose of the Stamp Act.

14. If Section 35 only deals with original instruments and

not copies Section 36 cannot be so interpreted as to allow
secondary evidence of an instrument to have its benefit.
The words “an instrument” in Section 36 must have the
same meaning as that in Section 35. The legislature only
relented from the strict provisions of Section 35 in cases
where the original instrument was admitted in evidence
without objection at the initial stage of a suit or proceeding.
In other words, although the objection is based on the
insufficiency of the stamp affixed to the document, a party
who has a right to object to the reception of it must do so
when the document is first tendered. Once the time for
raising objection to the admission of the documentary
evidence is passed, no objection based on the same
ground can be raised at a later stage. But this in no way
extends the applicability of Section 36 to secondary
evidence adduced or sought to be adduced in proof of the
contents of a document which is unstamped or
insufficiently stamped.”

This judgment also holds that a copy of the instrument cannot be

validated. It overruled the dictum that Section 36 will also apply where

Curative Petition (C) No. 44 of 2023 and Anr. Page 11 of 25

 secondary evidence of an instrument unduly stamped, has been wrongly

admitted.

18. In Hameed Joharan (DEAD) and Others v. Abdul Salam (DEAD) by

LRs. and Others10, this Court observed that applicability of the Stamp

Act stands restricted to the scheme of the Stamp Act. The Stamp Act

being a true fiscal statute in nature, strict construction and not liberal

interpretation is required to be effected . Section 2(15) includes a decree

of partition and Section 35 lays down a bar on unstamped or insufficient

stamp being admitted in evidence or being acted upon. The law however

does not prescribe that the period for filing appeal shall remain

suspended still stamp paper is furnished and the partition decree is

drawn thereon and signed by the judge. The whole purport of the Stamp

Act is to make available certain dues and collect revenue, but it does not

mean and imply an overriding effect on another statute operating in a

completely different sphere. Enforceability of a decree cannot be a

subject matter of Section 35 of the Stamp Act, neither can the limitation

be said to be under suspension. The heading of Section 35 itself denotes

the limited sphere of applicability.

19. In Dr. Chiranji Lal (D) by LRs. v. Hari Das (D) by LRs.11, a three Judge

Bench of this Court rejected the contention that an unstamped

preliminary decree is not enforceable and, therefore, the period of

10 (2001) 7 SCC 573.

11 (2005) 10 SCC 746.

Curative Petition (C) No. 44 of 2023 and Anr. Page 12 of 25

 limitation begins to run when the decree is engrossed on the stamp

paper. The Stamp Act is a fiscal measure with the object to secure

revenue for the State on certain classes of instruments. The Stamp Act

is not enacted to arm the litigant with a weapon of technicality to meet

the case of his opponent. As there is no rule which prescribes any time

for furnishing of stamp paper or to call upon a person to pay stamp duty

on a preliminary decree of partition, the proposition that period of

limitation would remain suspended till stamp paper is furnished and

decree engrossed thereon was rejected.

20. In Hariom Agrawal v. Prakash Chand Malviya12, a three Judge Bench

has referred to Karam Chand Thapar (supra), Jupudi Kesava Rao

(supra), to observe:

“10. It is clear from the decisions of this Court and a plain

reading of Sections 33, 35 and 2(14) of the Act that an
instrument which is not duly stamped can be impounded
and when the required fee and penalty has been paid for
such instrument it can be taken in evidence under Section
35 of the Stamp Act. Sections 33 or 35 are not concerned
with any copy of the instrument and party can only be
allowed to rely on the document which is an instrument
within the meaning of Section 2(14). There is no scope for
the inclusion of the copy of the document for the purposes
of the Stamp Act. Law is now no doubt well settled that
copy of the instrument cannot be validated by impounding
and this cannot be admitted as secondary evidence under
the Stamp Act, 1899.”

21. In Shyamal Kumar Roy v. Sushil Kumar Agarwal13, this Court

observed that Section 36 is a standalone clause which categorically

12 (2007) 8 SCC 514.

13 (2006) 11 SCC 331.

Curative Petition (C) No. 44 of 2023 and Anr. Page 13 of 25

 prohibits the court of law from reopening the matter with regard to the

sufficiency or otherwise of the stamp duty paid on an instrument in the

event the same has been admitted in evidence, the only exception being

Section 61 providing for reference and revision. Reliance was placed on

Javer Chand (supra).

22. Avinash Kumar Chauhan v. Vijay Krishna Mishra14 expounds the

meaning of the words ‘for any purpose’ used in Section 35 of the Stamp

Act. These words are to be given natural meaning and effect. They would

include collateral purpose, as was held in the decision of the Privy

Council in Ram Rattan v. Parma Nand15. Distinction was drawn between

non-effect of registration of a document in terms of Section 49 of the

Registration Act, 1908, which does not bar use of an unregistered

document for a collateral purpose. Section 35 is differently worded, and

when applicable, bars use of insufficiently stamped instrument for a

collateral purpose.

23. It is necessary to affirm this legal position, as we enter into contracts or

agreements several times in our interactions with others during the

course of the day. Even written documents in the form of invoices,

receipts or standard format agreements are often exchanged, and form

the terms of the interactions. An unstamped or under-stamped contract

or agreement cannot be impounded, except when it is produced for being

14 (2009) 2 SCC 532.

15 AIR 1946 PC 51.

Curative Petition (C) No. 44 of 2023 and Anr. Page 14 of 25

 received in evidence before a person authorised to do so or a public

officer in terms of Section 33 of the Stamp Act. To hold that insufficiently

stamped instrument does not exist in law, will cause disarray and

disruption.

24. Predictability and certainty are central tenets of law, especially in matters

of commercial and routine nature. Adherence to the principle of stare

decisis is essential for parties to be able to rely on the law to define their

conduct in commercial or ordinary day to day dealings. Transient laws

undermine public legitimacy and faith in the mandate of Rule of Law.

This Court has previously observed that before reviewing and revising

its earlier decision, the Court must satisfy itself whether it is necessary

to do so in the interest of public good or for any other compelling reason,

and the Court must endeavour to maintain certainty and continuity in the

interpretation of the law in the country.16 On several occasions, this Court

has emphasised on certainty and consistency in judicial

pronouncements as being the cornerstone of the administration of

justice.17 Consistency in judicial decisions is conducive to reassuring

parties of the consequences of the transactions forming part of their daily

affairs.18

16 Keshav Mills Co. Ltd. v. Commissioner of Income Tax, Bombay North, Ahmedabad, AIR 1965 SC
1636.
17 Government of Andhra Pradesh and Others v. A.P. Jaiswal and Others, (2001) 1 SCC 748.
18 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.

Curative Petition (C) No. 44 of 2023 and Anr. Page 15 of 25

25. An instrument is to be stamped as per Section 33 when it is executed or

first executed. The expressions ‘executed’ and ‘execution’ have been

defined in clause (12) to Section 2 of the Stamp Act to mean ‘signed’ or

‘signature’.19 It includes attribution of electronic record within the meaning

of Section 11 of the Information Technology Act, 2000 20. I shall now

analyse the relevance of execution or ‘signature’, with reference to an

arbitration agreement as defined in Section 7 of the Arbitration Act.

26. Section 7 of the Arbitration Act reads:

“7. Arbitration agreement.—(1) In this Part, “arbitration

agreement” means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which
may arise between them in respect of a defined legal
relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate
agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means
of telecommunication including communication through
electronic means which provide a record of the agreement;
or
(c) an exchange of statements of claim and defence in which
the existence of the agreement is alleged by one party and
not denied by the other.
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make
that arbitration clause part of the contract.”

19 2. Definitions.—In this Act, unless there is something repugnant in subject or context,—

(12) Executed and execution.—“Executed” and “execution”, used with reference to instruments, mean
“signed” and “signature” and includes attribution of electronic record within the meaning of Section 11
of the Information Technology Act, 2000 (21 of 2000).
20 11. Attribution of electronic records.—An electronic record shall be attributed to the originator—

(a) if it was sent by the originator himself;

(b) by a person who had the authority to act on behalf of the originator in respect of that electronic
record; or
(c) by an information system programmed by or on behalf of the originator to operate automatically.

Curative Petition (C) No. 44 of 2023 and Anr. Page 16 of 25

 An ‘arbitration agreement’ is an agreement by the parties to submit to

arbitration all or certain disputes which have arisen or may arise between

them. The disputes may be in respect of a defined legal relationship,

whether contractual or not. An arbitration agreement has to be in writing.

27. Sub-section (4) to Section 7 specifies when an arbitration agreement can

be said to be in writing. Clause (a) to sub-section (4) states that an

arbitration agreement can be a document signed by the parties.

According to clause (b) to sub-section (4) to Section 7, an arbitration

agreement can be established or inferred from exchange of letters, telex,

telegrams or other forms of communication, including communication

through electronic means. The provision does not mention the need for

‘execution’ or signatures of the parties.21 Similarly, clause (c) to sub-

section (4) to Section 7 which refers to exchange of statements of claim

and defence, in which the existence of the arbitration agreement is

alleged by one party and not denied by the other, does not refer to an

instrument which is signed by the parties. Clause (c) incorporates the

principle wherein the parties by “consent” agree to the existence of an

arbitration agreement, or impliedly agree by not denying its existence

when alleged by one party and not denied by the other. An arbitration

agreement is defined in the widest terms, and may be in the form of a

clause in the underlying contract or separate from an underlying

agreement. Significantly, even when it is a clause of the underlying

21
Caravel Shipping Services (P) Ltd. v. Premier Sea Foods Exim (P) Ltd. (2019) 11 SCC 461; Govind
Rubber Ltd. v. Louis Dreyfus Commodities Asia Pvt. Ltd. (2015) 13 SCC 477.

Curative Petition (C) No. 44 of 2023 and Anr. Page 17 of 25

 agreement, it is treated as a separate agreement, an aspect to which I

shall advert.

28. Section 1622 of the Arbitration Act, empowers the arbitral tribunal to rule

on its own jurisdiction. This includes the authority to decide the existence

and validity of the arbitration agreement. This has reference to Section 7

of the Arbitration Act, which I have examined. As per Section 16, an

arbitration agreement is an agreement independent of the other terms of

the contract, even when it is only a clause in the underlying contract. The

section specifically states that a decision by the arbitral tribunal holding

the underlying contract to be null and void, will not lead to ipso jure the

invalidity of the arbitration clause. The existence of an arbitration

agreement is to be ascertained with reference to the requirements of

Section 7 of the Arbitration Act. In a given case the underlying contract

may be null and void, but the arbitration clause may exist and be

22 16. Competence of arbitral tribunal to rule on its jurisdiction.—(1) The arbitral tribunal may rule
on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the
arbitration agreement, and for that purpose,—
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent
of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the
submission of the statement of defence; however, a party shall not be precluded from raising such a
plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the
matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3),
admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and,
where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings
and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an
arbitral award in accordance with Section 34.

Curative Petition (C) No. 44 of 2023 and Anr. Page 18 of 25

 enforceable. Invalidity of an underlying agreement may not, unless

relating to its formation, result in invalidity of the arbitration clause in the

underlying agreement. Hon’ble the Chief Justice has elaborately

explained the negative and positive contours of the doctrine of

separability in reference to an arbitration agreement, with which I

respectfully agree.

29. In this connection, I may note a decision of the Singapore High Court in

the case of BNA v. BNB and Another23 which holds that a defect in the

arbitration agreement does not render it void ab initio unless the defect

is so fundamental or irretrievable as to negate the parties’ intent or

agreement to arbitrate. This principle is based upon the observations of

the Court of Appeal of Singapore in the judgment in Insigma

Technology Co Ltd v. Alstom Technology Ltd24.

30. Jurisprudentially it is important to distinguish the terms and

consequences of an agreement void ab initio, and a voidable agreement,

and the effect of illegality and violation of law on an agreement.

31. As per the Indian Contract Act, 187225, an agreement not enforceable by

law is said to be void, and an agreement enforceable by law is a

contract.26 A contract which ceases to be enforceable by law becomes

23 [2019] SGHC 142.

24 [2009] SGCA 24.
25 For short, “the Contract Act”.
26 2 (g) An agreement not enforceable by law is said to be void; (h) An agreement enforceable by law

is a contract

Curative Petition (C) No. 44 of 2023 and Anr. Page 19 of 25

 void when it ceases to be enforceable.27

32. The requirements of Section 10 of the Contract Act28 are that the contract

should be made by parties competent to contract, for lawful

consideration and with lawful object. Consent of the parties should be

free. The contract should not be expressly declared to be void. Section

2 has to be read with Section 10 and not in isolation, in order to avoid

contradiction and to harmoniously apply the two sections.

33. Sections 1129 and 1230 deal with persons entitled to contract. In instances

where a person is explicitly declared as incompetent or does not fall

within the definition of a competent person under the aforesaid

provisions, like a minor or a person of unsound mind, a contract entered

into by such person would be void. An agreement is also rendered void

when both parties are under mistake of fact31. As per Section 24,

agreements are void if consideration and objects are unlawful in part. 32

This section does not have any application to the present issue, and

neither are we concerned with Section 25, which relates to agreements

without consideration and in which situation they have to be treated as

27 2 (j) A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.
28 10. What agreements are contracts.—All agreements are contracts if they are made by the free

consent of parties competent to contract, for a lawful consideration and with a lawful object, and are
not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in India and not hereby expressly repealed, by
which any contract is required to be made in writing or in the presence of witnesses, or any law relating
to the registration of documents.
29 Section 11, The Indian Contract Act, 1872.
30 Section 12, The Indian Contract Act, 1872.
31 Section 20, The Indian Contract Act, 1872.
32 Section 24, The Indian Contract Act, 1872.

Curative Petition (C) No. 44 of 2023 and Anr. Page 20 of 25

 void33. Agreements which are in restraint of marriage or in restraint of

trade are void.34 Agreements by way of wager are also void.35

Agreements, the meaning of which is not certain, or capable of being

made certain, are void.36 Section 28 states that agreements in restraint

of legal proceedings are void, but Exception 1 states that a contract by

which parties agree for disputes arising between them to be referred to

arbitration shall not render the contract illegal.37

34. Sections 13 to 19A relate to consent38, free consent39, coercion40, undue

influence41, fraud42, misrepresentation43, voidability of agreements

without free consent44, and power to set aside contract induced by undue

influence45. The Contract Act declares contracts affected by the

preceding provisions to be voidable at the option of the aggrieved party.

35. Under Section 21, a contract is not voidable because it is caused by

mistake as to law enforced in India46, and a contract where mistake of

fact is made by one party is also not voidable as per Section 2247.

33 Section 25, The Indian Contract Act, 1872.

34 Sections 26 and 27, The Indian Contract Act, 1872.
35 Section 30, The Indian Contract Act, 1872.
36 Section 29, The Indian Contract Act, 1872.
37 Section 28, The Indian Contract Act, 1872.
38 Section 13, The Indian Contract Act, 1872.
39 Section 14, The Indian Contract Act, 1872.
40 Section 15, The Indian Contract Act, 1872.
41 Section 16, The Indian Contract Act, 1872.
42 Section 17, The Indian Contract Act, 1872.
43 Section 18, The Indian Contract Act, 1872.
44 Section 19, The Indian Contract Act, 1872.
45 Section 19A, The Indian Contract Act, 1872.
46 Section 21, The Indian Contract Act, 1872.
47 Section 22, The Indian Contract Act, 1872.

Curative Petition (C) No. 44 of 2023 and Anr. Page 21 of 25

36. According to Section 23 of the Contract Act, the consideration or object

of an agreement is lawful unless it is forbidden by law or is of such nature

as to defeat the provisions of law, or is fraudulent. Neither are these

provisions applicable in case of unstamped or insufficiently stamped

instruments, nor is the consideration or object unlawful as it involves or

implies injury to a person or property of another. The last clause of

Section 23 applies when the consideration or object of an agreement is

regarded as immoral or opposed to public policy. An instrument whether

unstamped or insufficiently stamped will not fall foul on the ground of

consideration or object of the agreement being immoral, neither will it fall

foul as opposed to public policy.

37. In B.O.I. Finance Ltd. v. Custodian and Others48 this Court after

examining the case law on the subject of public policy, observed that in

pursuant to an agreement to do an illegal act, a transaction, in part, takes

place which would otherwise be valid if there was no such prior

agreement, then notwithstanding the illegality of the contract, the

completed transaction itself cannot be regarded as invalid.

38. Following this judgment, in Canara Bank and Others v. Standard

Chartered Bank49, it is held that for the contract to be declared void on

the ground of public policy, it must be shown that the object and

consideration of the contract was one which was illegal. Where the object

48 (1997) 10 SCC 488.

49 (2002) 10 SCC 697.

Curative Petition (C) No. 44 of 2023 and Anr. Page 22 of 25

 and consideration of the contract is not illegal as in the case of sale/

purchase of securities and payment of price, the contract will not be void

on the ground of being opposed to public policy. The contention that the

performance of contract in violation of law will be void on ground of public

policy was rejected. These observations were made in the context of the

argument that there was violation of law while carrying out the contract

and the arrangement was opposed to public policy.

39. A judgment by Mr. Justice S.S. Nijjar in Swiss Timing Ltd. v.

Commonwealth Games 2010 Organising Committee50, has

elaborately dealt with the terms ‘void’ and ‘voidable’ and states that they

are used loosely and interchangeably with each other, though strictly in

law, they are not so. It is also important to draw a distinction between

contracts which are void, and those which are void ab initio due to lack

of elements of offer or acceptance, which prevents a contract from

coming into operation. Thus, a contract by a minor or by a person of

unsound mind would be void due to lack of effectual offer or acceptance.

But once the contract is made, that is to say where parties, whatever

their innermost state of mind, have to all outward appearances, agreed

with sufficient certainty in the same terms of the subject matter, then the

contract is good unless and until it is set aside for failure of some

condition on which the existence of contract depends, or for fraud, or on

some other equitable ground. Neither party can rely upon its own mistake

50 (2014) 6 SCC 677.

Curative Petition (C) No. 44 of 2023 and Anr. Page 23 of 25

 to say that it was a nullity from the beginning, no matter that it was a

mistake which to his mind was fundamental, no matter that the other

party knew that he was under a mistake.51

40. The judgment in Vidya Drolia and Others v. Durga Trading

Corporation52, after referring to Avitel Post Studioz Ltd. v. HSBC PI

Holdings (Mauritius) Ltd.53, draws a distinction between contract

obtained through fraud, and post contract fraud or cheating. The latter

falls outside the scope of Section 17 of the Contract Act. It observes that

the fraud may permeate the entire contract and above all the agreement

of arbitration, rendering it void. However, it may not be so when the

allegations of fraud touch upon the internal affairs of the parties inter se,

having no implication in the public domain.

41. There are also two aspects of the judgment in Vidya Drolia (supra),

which need to be noticed. First, I agree to and accept the error made by

me in the judgment which observes that Section 11(6A) of the Arbitration

Act has ceased to be operative in view of the enforcement of Section 3

of the Arbitration and Conciliation (Amendment) Act, 2019. As rightly

observed by Hon’ble the Chief Justice, Section 3 of the Arbitration and

Conciliation (Amendment) Act, 2019 which relates to the amendment to

51 See ITC Ltd. v. George Joseph Fernandes and Another (1989) 2 SCC 1, which quotes from Smith
v. Hughes LR (1871) 6 QB 597 and Solle v. Butcher (1950) 1 KB 671. The judgment in ITC Ltd.(supra)
was under the Arbitration Act,1940 and should not be applied to interpret the Arbitration and
Conciliation Act, 1996.
52 (2021) 2 SCC 1.
53 (2021) 4 SCC 713.

Curative Petition (C) No. 44 of 2023 and Anr. Page 24 of 25

 Section 11 has not been enforced. Secondly, as has been noted in the

judgment of Hon’ble the Chief Justice and in Career Institute

Educational Society v. Om Shree Thakurji Educational Society54, the

issue before this Court in Vidya Drolia (supra) was not the validity of an

unstamped or under-stamped arbitration agreement. No specific opinion

was expressed on this question. The reference to the validity of an

unstamped arbitration agreement, as mentioned in Garware Wall

Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.55, was only

to serve the purpose of drawing a comparison between the ‘existence’

and the ‘validity’ of an arbitration agreement, and not a comment or

opinion on the ‘existence’ of unstamped or under-stamped arbitration

agreements.

42. For the reasons set out in detail by Hon’ble the Chief Justice and

recorded herein, I agree with the conclusions drawn, and referred to

above. I also concur with the other findings and ratio in the judgment by

Hon’ble the Chief Justice.

........................................J.
(SANJIV KHANNA)

NEW DELHI;
DECEMBER 13, 2023.

54 2023 SCC OnLine SC 586.

55 (2019) 9 SCC 209.

Curative Petition (C) No. 44 of 2023 and Anr. Page 25 of 25