Supreme Court To Hear Curative Petition Against Judgment That Arbitration Clause In Insufficiently Stamped Agreement Cannot Be Acted Upon

A bench comprising of Chief Justice DY Chandrachud, Justice Sanjay Kishan Kaul, Justice Sanjiv Khanna, Justice B R Gavai and Justice Surya Kant issued notice in the matter and listed it for hearing. 

A review petition against the said judgment was dismissed by a bench of Justice N V Ramana, Justice B R Gavai and Justice Surya Kant on 20.7.2021.

The Supreme Court in its judgment dated 14th February 2020, had observed that an arbitration clause in an agreement which is required to be duly stamped, if not sufficiently stamped, cannot be acted upon by the Court.

In the said case, one of the parties to the agreement filed a petition under Section 11(6) of the Arbitration Act before the High Court of Karnataka. The other party, entered appearance and contended that the lease deed being insufficiently stamped had to be mandatorily impounded under Section 33 of the Karnataka Stamp Act, 1957 and it could not be relied upon unless proper duty and penalty was paid. However, the High Court invoked the power under Section 11(6) of the Act, and appointed an Arbitrator to decide the dispute between the parties.

In appeal, the Apex Court bench comprising of then CJI SA Bobde, Justices BR Gavai and Surya Kant noted that admittedly, both the lease deeds are neither registered nor sufficiently stamped as required under the Karnataka Stamp Act, 1957. The bench had relied upon SMS Tea Estates Private Limited vs. Chandmari Tea Company Private Limited.

In April, a Constitution Bench of the Supreme Court by 3:2 majority had held that arbitration agreement in unstamped contract is unenforceable.