India: SC: Validity Of An Unstamped/Insufficiently Stamped Agreement In Relation To Section 11(6a) Of The Arbitration And Conciliation Act, 1996

Last Updated: 3 May 2019
Article by Chakrapani Misra, Kathleen Lobo and Shobhana Narayan

Most Read Contributor in India, August 2019


The question that arose before the Supreme Court in the appeal in Garware Wall Ropes Ltd vs Coastal Marine Constructions & Engineering Ltd, Civil Appeal No 3631 of 2019 (present case) was whether the earlier judgement of the Supreme Court in the case of SMS Teas Estates (P) Ltd Vs Chandmari Tea Co (P) Ltd, (2011) 14 SCC 66 (SMS Teas Estates) would continue to apply to  the introduction of Section 11 (6A) of the Arbitration and Conciliation Act 1996 (1996 Act), by way of the Arbitration and Conciliation (Amendment) Act 2015 (2015 Act).

The Supreme Court in SMS Teas Estates had held that where an arbitration agreement is contained in an unstamped/insufficiently agreement, the provisions of the Indian Stamp Act 1899 (Indian Stamp Act) require the judge hearing the application under Section 11 application under the 1996 Act (Section 11 application) to impound the agreement and ensure that stamp duty and penalty (if any) are paid thereon before proceeding with the Section 11 application.

On 10 April 2019, the Supreme Court in the present case has held that "the introduction of Section 11(6A) does not, in any manner, deal with or get over the basis of the judgment in SMS Tea Estates (supra), which continues to apply even after the amendment of Section 11(6A)". The basis for arriving at this decision was that an arbitration clause contained in an agreement would not exist when it is not enforceable by law, that is to say, when the agreement is unstamped/insufficiently stamped as per the Indian Stamp Act.

Brief Facts and Arguments of Parties:

The Supreme Court in the present case was hearing a challenge from a decision of the Bombay High Court, which allowed the Section 11 application of the Respondent for appointment of an arbitrator, notwithstanding that the sub-contract agreement between the Appellant and Respondent which contained the arbitration clause was not stamped.

The Appellant challenged the judgement of the Bombay High Court primarily on that the ground that Sections 33 and 34 of the Maharashtra Stamp Act 1958 (Maharashtra Stamp Act), which were similar to the provisions of the Indian Stamp Act viz Sections 33 and 35, required judicial authorities to impound instruments which cannot be admitted in evidence and acted upon until duly stamped. Whilst relying upon the 246th Law Commission Report, it was argued by the Appellant that the introduction of Section 11 (6A) by the 2015 Act was necessitated as a result of two previous judgments of the Supreme Court in SBP & Co v Patel Engineering Ltd, (2005) 8 SCC 618 (SBP & Co) and National Insurance Co Ltd v Boghara Polyfab (P) Ltd, (2009) 1 SCC 267 (Boghara Polyfab) and not because of SMS Teas Estates, which remains untouched.

The Respondent referred to Sections 8, 16, and 45 of the 1996 Act and contended that the object of the 2015 Act in introducing Section 11(6A) was to confine the Court hearing a Section 11 application to the examination of the "existence" of an arbitration agreement and nothing more, not even its "validity".  This was supported by the argument that an arbitration agreement is independent of the agreement in which it is contained, and as long as the arbitration agreement is in writing, and therefore, the same "exists" in fact, the Court hearing the Section 11 application ought to appoint an arbitrator, leaving all other preliminary issues to the arbitrator. It was further argued that the Indian Stamp Act/Maharashtra Stamp Act are fiscal legislations intended to collect revenue and, if at all, will go to "validity" of the arbitration agreement and not to its "existence".

Analysis and Decision by Supreme Court:

In deciding the present case, the Supreme Court considered relevant provisions contained in the 1996 Act and 2015 Act, in addition to provisions of the Maharashtra Stamp Act and Indian Contract Act 1872. The Supreme Court also analyzed the recommendation of the 246th Law Commission Report to introduce Section 11 (6A) as an amendment to the 1996 Act, as it was felt that the earlier judgments in the cases of SBP & Co and Boghara Polyfab required Section 11of the 1996 Act to be revisited.

Apart from the above, the Supreme Court examined whether the decision in SMS Tea Estates was done away with by the expression "notwithstanding any judgment, decree or order of any Court" contained in Section 11(6A) of the 2015 Act.

In SMS Tea Estates, the lease deed was neither stamped nor registered and it was therefore held therein that "when a lease deed or any other instrument is relied upon as contending the arbitration agreement, the court should consider at the outset, whether an objection in that behalf is raised or not, whether the document is properly stamped. If it comes to the conclusion that it is not properly stamped, it should be impounded and dealt with in the manner specified in Section 38 of the Stamp Act. The court cannot act upon such a document or the arbitration clause therein. But if the deficit duty and penalty is paid in the manner set out in Section 35 or Section 40 of the Stamp Act, the document can be acted upon or admitted in evidence"

SMS Tea Estates had taken account of the mandatory provisions contained in the Indian Stamp Act and held them applicable to judicial authorities, which would include the Supreme Court and High Courts acting under Section 11 of the 1996 Act. This would mean that if the document was found to be not duly stamped, Section 35 of the Indian Stamp Act barred the said document from being acted upon, including the arbitration clause contained therein. The document was to be impounded and thereafter dealt with as per the provision of the Stamp Act.

The Supreme Court in the present case also discussed SBP & Co and held that Section 16 of the 1996 Act cannot be used to contend that an arbitration agreement has an independent existence of its own, and as such ought to be applied to Section 11 applications as well.

In the present case it was held that when an application under Section 11(4) to 11(6) of the 1996 Act is before a court, and it comes across as an arbitration clause in an agreement which is unstamped, the court is enjoined by the provisions of the Indian Stamp Act to first impound the agreement and see that stamp duty and penalty (if any) is paid, before the agreement, as a whole, can be acted upon, including the arbitration clause therein. It was further held that Indian Stamp Act applies to the agreement as a whole and the arbitration clause cannot be bifurcated in order to give it an independent existence for certain limited purposes. Hence, introduction of Section 11 6A vide the 2015 Act would not in any manner override SMS Tea Estates, which continues to apply.

This was further cemented by the Supreme Court by its declaration that an agreement only becomes a contract if it becomes enforceable under the law, and under the Indian Stamp Act, an agreement does not become enforceable under law if the same is unstamped or insufficiently stamped. Hence, an arbitration clause contained in any such an agreement would not exist when it is not enforceable.

The Supreme Court also dealt with the "existence" of an arbitration agreement as opposed to the "validity" of an arbitration agreement, whilst understanding the expression "existence" as arrived at by the Supreme Court in United India Insurance Co Ltd and Ors v Hyundai Engineering and Construction Co Ltd and Ors, 2018 SCC OnLine SC 1045 (United India Insurance Co), wherein it was found that the insurer repudiated the claim, though an arbitration clause did "exist" in the policy, because it would not exist in law, when the insurer has not admitted or accepted liability. Similarly, if an arbitration clause forms part of an insufficiently/unstamped instrument, the arbitration clause would not exist as a matter of law until the instrument was duly stamped.

Recent Bombay High Court Judgment:

A recent judgment delivered on 4 April 2019 in the case of Gautam Landscapes Private Limited Vs Shailesh Shah and Ors, 2018 SCC OnLine SC 1045, by a Full Bench of the Bombay High Court had decided that a Court could act upon a document containing an arbitration agreement while considering an application under Sections 9 or 11 (6) of the 1996 Act, notwithstanding that the document was unstamped or insufficiently stamped.

The Supreme Court in the present case held that the latter decision was incorrectly made by the Bombay High Court, thus effectively overriding the Bombay High Court's judgment, as far as its applicability to an application under Section 11(6) of the 1996 Act was concerned.


This judgment may be viewed as a step back in the pro-arbitration direction adopted by most Courts in the recent past.

In addition to this, it can open the floodgates to parties raising such objections with the motive to stall the arbitration proceedings at the very nascent stage of appointment of arbitrators.

Further, the endeavor to have the stamp authorities decide the issue of payment of deficient stamp duty and penalty (if any) within 45 (forty five) days from receipt of the instrument is a far cry from what may be actually achievable.

Also, what is left to be tested, is the applicability of this judgment to applications under section 9 of the 1996 Act. The natural corollary would be that this judgment would also apply to such cases, which in turn could delay and affect the substantive rights of the aggrieved party.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions