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In the historic case of M/s N.N. Global Mercantile Private Limited v M/S Indo Unique Flame Ltd & Ors, the Supreme Court of India ruled that an Arbitration Agreement held in an unstamped instrument is legally unenforceable.

Stamp duty is a levy levied in India by affixing stamps to documents that record or include specified transactions. The Indian Stamp Act of 1899, sometimes known as the ‘Act,’ governs the payment of stamp duty across the country. A document or instrument that has not been properly stamped cannot be offered as evidence or lawfully acted upon.

In a recent case, the Court ruled that, while not being directly addressed in the Act, an Arbitration Agreement is deemed an independent agreement and is subject to obligation under the Act’s underlying provisions. An Arbitration Agreement that is not properly stamped or has inadequate stamping is not legally binding and remains invalid until it is stamped.

Failure to produce properly stamped papers, such as Arbitration Agreements, charterparties, and bills of lading, can result in significant holdups and extra administrative processes, particularly in times of urgency.

The possible consequence of this judgement on urgent Court claims for interim relief or protecting against time limits in circumstances where arbitration is ostensibly commenced but the Arbitration Agreement lacks appropriate stamping is unknown. The Court’s opinion did not explicitly address these concerns.

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