Supreme Court Refers Unstamped Arbitration Agreement Case To A Seven-Judge Bench

The Supreme Court on Tuesday referred a seven-judge bench to reconsider the issue of whether an arbitration agreement in an unstamped contract is enforceable or not.

The reference was made by a five-judge bench led by the Chief Justice of India, DY Chandrachud.

The court said that arbitrators across the country were facing uncertainties in the backdrop of the five-judge bench judgement and that the issue was of significant importance.

The case will now come up for a hearing on Oct. 11.

In April 2023, a constitution bench of the top court held that an arbitration agreement in an unstamped contract would be considered non-existent in law.

The judgement was fractured, with three judges ruling in its favour and two against it.

Laying out the dissenting opinion, Justice Hrishikesh Roy said the objective behind the Arbitration and Conciliation Act, 1996, was to avoid procedural complexity and litigation between courts.

He said that enforcement of the arbitration agreement should not be stalled on an issue that is capable of being resolved at a later stage by the arbitrator.

Justice Ajay Rastogi, in his minority view, said an examination of the arbitration agreement should be done cautiously so that the legislative intent behind the provisions is not disturbed by opening the door wide open for judicial intervention.

The case reached the Supreme Court in 2020. A bench of Justices DY Chandrachud, Indu Malhotra, and Indira Banerjee held that just because a commercial contract is unstamped, it doesn’t mean that the arbitration clause in it will become invalid.

However, the case was referred to a larger bench as the court was of the view that the issue required to be authoritatively settled by a constitutional bench.