Arbitration Clause In An Unstamped Agreement

In a recent judgment, the Indian Supreme Court considered the validity of an arbitration clause and the arbitral award made under that clause when such an arbitration clause was part of an unstamped agreement. Specifically, in Garware Wall Ropes v Coastal Marine Constructions & Engineering Ltd.1, the Supreme Court had to consider an appeal arising from the decision of the Bombay High Court, which appointed an arbitrator under an arbitration clause resulting from an unstamped agreement. The Supreme Court overturned the Mumbai High Court`s decision and sent it back for a new decision. `(6A) The Supreme Court or, as the case may be, the High Court shall be limited to the consideration of an application under Subsection (4) or subsection 1. 5 or paragraph (6) without prejudice to a judgment, order or order of a court for the examination of the existence of an arbitration agreement. While questions relating to the existence of an arbitration agreement can only now be settled by the arbitrator, Parliament has extended the powers of an arbitrator, thereby expanding its jurisdiction. The 2019 amendments would then support the view that arbitrators, not courts, should ultimately consider all objections at the stage of appointing an arbitrator, including those relating to the stamp. It therefore remains to be seen what the consequence of the deletion of Article 11, paragraph 6A, which limited judicial review of arbitration clauses to consideration of the existence of an arbitration agreement, will be. The Supreme Court decided that, in such a situation, the Tribunal could not react to the arbitration agreement that is part of the act, unless the stamp duty and penalty due for the deed are paid, which means that it cannot react to the arbitration agreement, which is also part of the act. The Tribunal held that section 35 of the Stamp Act 1899 was different from section 49 of the Registration Act with respect to an unregistered document and was distinguished by the fact that it contained no reservation such as section 49 of the Registration Act, which allows the instrument to be used to justify a security transaction.

Therefore, the Tribunal held that, in this case, the deed of lease or any other document on which the arbitration agreement is based must first verify whether or not an objection was raised on that behalf, whether the document is properly sealed. If it is concluded that it is not properly stamped, it should be seized and dealt with in the manner defined in section 38 of the Stamps Act. The Tribunal cannot react to such a document or the arbitration clause contained therein. However, if the deficit tax and penalty are paid in the manner set out in section 35 or section 40 of the Stamps Act, the document may be treated or admitted as evidence. In Garware, the Tribunal had the opportunity to extend the application of the salvatorial clause principle in order to maintain the parties` intention to arbitrate. The raison d`ĂȘtre of the salvatoriale clause principle is to ensure that defects that threaten the existence of the material contract (such as: lack of consent, incorrect signature, etc.) do not hinder the appeal to an arbitration agreement. . .


Comments are closed.