Interplay, In Re

Para 43

• The procedure contemplated by the Stamp Act facilitates the collection of revenue. It permits instruments to be impounded not only by persons in charge of a public office or those who are empowered by law to receive evidence but also by any person who is empowered to receive evidence by consent of parties. The statute then sets out the procedure to be followed upon impounding a document. This procedure ensures that stamp-duty is paid. After the payment of the appropriate amount under the appropriate description in Schedule I and the penalty (if any), the Stamp Act provides for the certification of such payment by an endorsement by the appropriate authority. Once an instrument has been endorsed, it may be admitted into evidence, registered, acted upon or authenticated as if it had been duly stamped.

Para 140

• Section 11(6) has had a long and chequered history before this Court, particularly in respect of the nature of function of the Chief Justice or his designate in the appointment of an arbitrator. In SPB & Co. v. Patel Engineering Ltd. [2005] 8 SCC 618 a seven-Judge Bench of this Court held that the power exercised by the Chief Justice of India or a Chief Justice of the High Court under section 11(6) is a judicial power. In the process, this Court analysed the scope of the powers and authority of the referral court under section 11(6). Moreover, this Court noted that Sections 8 and 11 are complementary in nature. Consequently, if the judicial authority acting under section 8 has to mandatorily decide the issue of jurisdiction before referring the parties to arbitration, the same standard of scrutiny was also held to be applicable to the reference under section 11. In conclusion, it was held that the Chief Justice or their designate at the referral stage under section 11(6) had the right to determine all preliminary issues.

Para 218

• The discussion in preceding segments indicates that the referral court at Section 11 stage should not examine or impound an unstamped or insufficiently stamped instrument, but rather leave it for the determination by the arbitral tribunal. When a party produces an arbitration agreement or its certified copy, the referral court only has to examine whether an arbitration agreement exists in terms of Section 7 of the Arbitration Act. The referral court under section 11 is not required to examine whether a certified copy of the agreement/instrument/contract discloses the fact of payment of stamp duty on the original. Accordingly, we hold that the holding of this Court in SMS Tea Estate (P.) Ltd. (supra), as reiterated in N N Global Mercantile (P.) Ltd. (supra), is no longer valid in law.

Para 224

• The conclusions reached in this judgment are summarised below:

  • Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable;
  • Non-stamping or inadequate stamping is a curable defect;
  • An objection as to stamping does not fall for determination under sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists;
  • Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal; and
  • The decision in NN Global Mercantile (P.) Ltd. (supra) and SMS Tea Estates (P.) Ltd. (supra) are overruled. Paragraphs 22 and 29 of Garware Wall Ropes Ltd. (supra) are overruled to that extent.