A Constitution Bench of the Supreme Court by a majority of 3:2 has held that arbitration agreement in unstamped contract is not enforceable and valid.

The majority judgment said, “an arbitration agreement not recognized by the Stamp Act shall not be valid at law.”

Legal experts say that the judgment has brought some clarity on the presumption and interpretation that if stamp duty is not paid or short paid, the arbitration agreement would be invalid and would lead to disputes. Time bound resolution will not be available for resolution.

“This is a serious issue and will have ramifications for all ongoing arbitrations,” said Vidarbha Desai, Head of International Dispute Resolution & Investigations Practice, Nishith Desai Associates. In this, the parties can object to the delay in the process due to short payment or non-payment of stamp duty.

Justice KM Joseph, Justice Ajay Rastogi, Justice Aniruddha Bose, Justice Hrishikesh Roy and Justice CT Ravikumar’s bench said in the judgment that arbitration must be registered and on stamp, only then it will be valid and enforceable.