It is about unstamped agreements, Summaries of Commercial Law

Download It is about unstamped agreements and more Summaries Commercial Law in PDF only on Docsity! IN RE: THE INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER THE ARBITRATION AND CONCILIATION ACT, 1996, AND THE INDIAN STAMP ACT 1899. Held- that the unstamped agreement is inadmissible under the Stamp Act, but cannot be rendered void ab initio. Thus, arbitration clauses in unstamped or inadequately stamped agreements are enforceable. The Court took note of Section 35 of the Stamp Act, which renders instruments which are not duly stamped inadmissible in evidence. However, Section 42 of the Stamp Act, an instrument is admissible in evidence once the payment of duty and a penalty (if any) is complete. 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. Hence, it is a curable defect. In N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.,1 the three- judge bench held that an arbitration agreement, being separate and distinct from the underlying commercial contract, would not be rendered invalid, unenforceable, or non-existent. On referring the case to a 5-judge bench, the majority opined that unstamped arbitration agreements are not valid before the law. Difference between inadmissibility and voidness The Court said that 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. An agreement can be void without its nature as a void agreement has an impact on whether it may be introduced in evidence. Similarly, an agreement can be valid but inadmissible in evidence. The Court remarked that Section 35 of the Stamp Act is unambiguous, it renders a document inadmissible and not void. The effect of not paying duty or paying an 1 (2021) 4 SCC 379. 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.” Purpose of both legislation The Court said that the Stamp Act is fiscal legislation which is intended to raise revenue for the government. The Stamp Act is legislation which is enacted in the interest of revenue. 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 The Court said that 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 The corollary is that it is not permissible to do what is not mentioned under the Arbitration Act. Therefore, provisions of other statutes cannot interfere with the working of the Arbitration Act, unless specified otherwise. 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. Separability of arbitration agreement The Court said that 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. Further, the Chief said that the Arbitration Act, 1996, enabled the arbitral tribunal to determine its jurisdiction via the principle of Kompetenz-kompetenz enshrined under Section