Finally, the decision of the Five Judge Bench in NN Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. (25.04.2023: SCI) is out and can be accessed from here. This post provides a quick read of the summary of the decision as encapsulated in the conclusion of Justice KM Joseph’s judgment (p. 1 to 140 of the pdf), quoted below. Justice KM Joseph on his behalf and on behalf of Justice Aniruddha Bose, penned the majority opinion. The dissenting views were expressed by Ajay Rastogi, J. (p. 141- 201 of the pdf file) and Hrishikesh
Roy, J. (p. 202-279 of the pdf file). Justice CT Ravikumar gave an opinion concurring with Justice KM Joseph (p. 280- 298 of the pdf file).
Justice Joseph’s conclusions are reproduced below:
“109. The view taken in SMS Tea Estates (supra) as
followed in Garware (supra) and by the Bench in
Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar
Chattram and other Charities v. Bhaskar Raju and
Brothers and others36 as to the effect of an unstamped
contract containing an Arbitration Agreement and the
steps to be taken by the Court, represent the correct
position in law as explained by us hereinbefore. N.N.
Global (supra) was wrongly decided, when it held to the
contrary and overruled SMS Tea Estates (supra) and
Garware (supra).
110. An instrument, which is exigible to stamp
duty, may contain an Arbitration Clause and which is
not stamped, cannot be said to be a contract, which is
enforceable in law within the meaning of Section 2(h) of the Contract Act and is not enforceable under
Section 2(g) of the Contract Act. An unstamped
instrument, when it is required to be stamped, being
not a contract and not enforceable in law, cannot,
therefore, exist in law. Therefore, we approve of
paragraphs-22 and 29 of Garware (supra). To this
extent, we also approve of Vidya Drolia (supra),
insofar as the reasoning in paragraphs-22 and 29 of
Garware (supra) is approved.
111. The true intention behind the insertion of
Section 11(6A) in the Act was to confine the Court,
acting under Section 11, to examine and ascertain about
the existence of an Arbitration Agreement.
112. The Scheme permits the Court, under Section 11
of the Act, acting on the basis of the original
agreement or on a certified copy. The certified copy
must, however, clearly indicate the stamp duty paid as
held in SMS Tea Estates (supra). If it does not do so,
the Court should not act on such a certified copy.
113. If the original of the instrument is produced
and it is unstamped, the Court, acting under Section 11, is duty-bound to act under Section 33 of the Stamp
Act as explained hereinbefore. When it does so,
needless to say, the other provisions, which, in the
case of the payment of the duty and penalty would
culminate in the certificate under Section 42(2) of the
Stamp Act, would also apply. When such a stage arises,
the Court will be free to process the Application as
per law.
114. An Arbitration Agreement, within the meaning
of Section 7 of the Act, which attracts stamp duty and
which is not stamped or insufficiently stamped, cannot
be acted upon, in view of Section 35 of the Stamp Act,
unless following impounding and payment of the
requisite duty, necessary certificate is provided under
Section 42 of the Stamp Act.
115. We further hold that the provisions of
Sections 33 and the bar under Section 35 of the Stamp
Act, applicable to instruments chargeable to stamp duty
under Section 3 read with the Schedule to the Stamp
Act, would render the Arbitration Agreement contained
in such instrument as being non-existent in law unless
the instrument is validated under the Stamp Act.
116. In a given case, the Court has power under
paragraph-5 of the Scheme, to seek information from a
party, even in regard to stamp duty.
117. We make it clear that we have not pronounced
on the matter with reference to Section 9 of the Act.
The reference to the Constitution Bench shall stand
answered accordingly…”
Happy reading!