Disputes could be referred to arbitration: The judicial authority could refer the dispute to arbitration under Section 8 of the Arbitration Act.What does this mean for you?Īccording to the Supreme Court in the Global Mercantile Judgment, pending the payment of the stamp duty on a document containing the arbitration clause: The party invoking the arbitration clause was also allowed to proceed to file for interim relief to protect and preserve the subject matter of the dispute under Section 9 of the Arbitration Act. The Supreme Court directed the document containing the arbitration clause to be impounded after referring the case to arbitration, and the party invoking the arbitration clause was directed to pay the stamp duty. However, it clarified that the adjudication of the rights and obligations under the document would not proceed till the parties complied with the mandatory provisions of the stamp laws. The Supreme Court in the Global Mercantile Judgment further held that non-payment of the stamp duty on the document containing the arbitration agreement did not prevent the arbitration agreement from being enforced.
The Supreme Court clarified that the doctrine of severability was introduced to ensure that technical lapses in the underlying agreement (such as non-payment of stamp duty) did not take away from the parties’ intention to arbitrate, in contrast to what the Court had held in the Garware Judgment. & Others (“ Global Mercantile Judgment”), revisited the findings in the Garware Judgment.
What has changed since then?Ī recent judgment by a three-judge bench of the Supreme Court, on January 11 th, 2021, in N.N. The Garware Judgment potentially increased hindrances for the arbitration mechanism at the initial stage itself by increasing the scope of judicial interference in connection with the appointment of arbitrators and could have also had the effect of delaying the grant of interim relief, thereby rendering the arbitration process nugatory. This also meant that neither the parties, nor the Court could appoint an arbitrator till the requisite stamp duty was paid.Īpplying this analysis of the Garware Judgment in respect of applications under Section 11 of the Arbitration Act, it could be argued that even an application for interim relief under Section 9 of the Arbitration Act would not be decided until the document containing the arbitration clause was impounded and the appropriate stamp duty was paid. It held that before proceeding under the Arbitration and Conciliation Act, 1996 (“ Arbitration Act”), the Court ought to impound the document and send it for collection of stamp duty dues. We had analysed how the Garware Judgment took a narrow view on invoking arbitration agreements in unstamped documents, in holding that an arbitration could not be invoked in case of an arbitration agreement forming a part of an unstamped document, until the defect of non-stamping was rectified. We had remarked that much was left to be done to strike a balance between arbitration law, stamping law and the equitable rights of litigants. Coastal Marine Construction & Engineering Ltd. In our earlier article, we had discussed the decision of the Supreme Court in Garware Wall Ropes Ltd. What happened in the Garware Wall Ropes’ Judgment?