NDLI: in Re: Interplay Between Arbitration Agreements Under The Arbitration and Conciliation Act 1996 and The Indian Stamp Act 1899 Vs. --

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Arbitration and Conciliation Act 1996
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Indian Stamp Act, 1899 (2 of 1899) Arbitration and Conciliation Act, 1996 (26 of 1996)
Case(s) Referred	Referred Case 0 Referred Case 1
Case Type	Curative Petition
Court	Supreme Court of India
Disposal Nature	Others
Headnote	Issue for consideration: The issue at hand arose in the context of three statutes; the Arbitration and Conciliation Act 1996, the Indian Stamp Act, 1899, and the Indian Contract Act, 1872. The Stamp Act imposes duty on “instruments”. Arbitration agreements are often embedded in underlying instruments or substantive contracts. The primary issue for consideration was whether such arbitration agreements would be non-existent, unenforceable, or invalid if the underlying contract is not stamped. The challenge before the Supreme Court was to harmonize the provisions of the Arbitration and Conciliation Act, 1996 and the Stamp Act, 1899. Arbitration and Conciliation Act 1996 – ss.8 and 11 – Arbitration agreements embedded in underlying instruments or substantive contracts – Whether such arbitration agreements would be non-existent, unenforceable, or invalid if the underlying contract is not stamped – Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899 – Unstamped or insufficiently stamped instruments – If admissible in evidence – Non-stamping or inadequate stamping – If curable.Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): Agreements which are not stamped or are inadequately stamped are inadmissible in evidence u/s.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 – The Stamp Act itself provides for the manner in which the defect may be cured and sets out a detailed procedure for it – An objection as to stamping does not fall for determination u/ss.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. [Paras 48 and 224] – Held (per Sanjiv Khanna, J.) (Concurring): Unstamped or insufficiently stamped instruments inadmissible in evidence in terms of s.35 of the Indian Stamp Act, 1899, are not rendered void and void ab initio – An objection as to the under-stamping or non-stamping of the underlying contract will not have any bearing when the prima facie test, “the existence of arbitration agreement”, is applied by the courts while deciding applications under Sections 8 or 11 of the Arbitration and Conciliation Act, 1996 – An objection as to insufficient stamping of the underlying agreement can be examined and decided by the arbitral tribunal. [Para 1] Evidence – Admissibility of documents – Difference between inadmissibility and voidness – Contract Act, 1872 – s.2(g).Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The admissibility of an instrument in evidence is distinct from its validity or enforceability in law – An agreement can be void without its nature as a void agreement having an impact on whether it may be introduced in evidence – Similarly, an agreement can be valid but inadmissible in evidence – When an agreement is void, one is speaking of its enforceability in a court of law – When it is inadmissible, one is referring to whether the court may consider or rely upon it while adjudicating the case – This is the essence of the difference between voidness and admissibility. [Paras 44, 45 and 46]Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The Stamp Act is a fiscal legislation which is intended to raise revenue for the government – It is a mandatory statute. [Para 58] Arbitration – Principle of arbitral autonomy – Doctrines / Principles.Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The principle of arbitral autonomy is an integral element of the ever-evolving domain of arbitration law – Arbitral autonomy means that the parties to an arbitration agreement can exercise their contractual freedom to bestow the arbitral tribunal with the authority to decide disputes that may arise between them – The basis of arbitral autonomy is to give effect to the true intention of parties to distance themselves from the “risk of domestic judicial parochialism. [Para 66]Doctrines / Principles – Principle of judicial interference in arbitration proceedings – Scope of non-obstante clause contained in s.5 of the Arbitration and Conciliation Act 1996 – Legislative intentionHeld (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The principle of judicial non-interference in arbitral proceedings serves to proscribe judicial interference in arbitral proceedings, which would undermine the objective of the parties in agreeing to arbitrate their disputes, their desire for less formal and more flexible procedures, and their desire for neutral and expert arbitral procedures – The principle of judicial non-interference in arbitral proceedings respects the autonomy of the parties to determine the arbitral procedures – This principle has also been incorporated in international instruments – s.5 of the Arbitration Act is of aid in interpreting the extent of judicial interference under ss.8 and 11 of the Arbitration Act – s.5 contains a general rule of judicial non-interference – Therefore, every provision of the Arbitration Act ought to be construed in view of s.5 to give true effect to the legislative intention of minimal judicial intervention. [Paras 69 and 82]Arbitration and Conciliation Act, 1996 – Is a self-contained code – Provisions of other statutes cannot interfere with the working of the Arbitration Act, unless specified otherwise. [Para 85 in judgment of Dr. D.Y. Chandrachud, CJI] Arbitration – Arbitration agreement – Is the foundation of arbitration as it records the consent of the parties to submit their disputes to arbitration. [Para 88 in judgment of Dr. D.Y. Chandrachud, CJI] Arbitration – Arbitration agreement – Separability of the arbitration agreement from the underlying contract in which it is containedHeld (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): An arbitration agreement is juridically independent from the underlying contract in which it is contained – The concept of separability reflects the presumptive intention of the parties to distinguish the underlying contract, which captures the substantive rights and obligations of the parties, from an arbitration agreement which provides a procedural framework to resolve the disputes arising out of the underlying contract – This presumption has various consequences in theory and practice, the most important being that an arbitration agreement survives the invalidity or termination of the underlying contract – The separability presumption gives effect to the doctrine of competence-competence. [Paras 90 and 112] Doctrines / Principles – Doctrine of competence-competence – Comparative analysis – Arbitration and Conciliation Act 1996 – s.16.Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The doctrine of kompetenz-kompetenz (also known as competence competence), as originally developed in Germany, was traditionally understood to imply that arbitrators are empowered to make a final ruling on their own jurisdiction, with no subsequent judicial review of the decision by any court – However, many jurisdictions allow an arbitral tribunal to render a decision on its jurisdiction, subject to substantive judicial review – The UK position is that although the arbitral tribunal is empowered to consider whether it has jurisdiction, its determination is subject to the examination of the courts – The courts in the United States have considered the principle of competence-competence to be intertwined with the separability presumption – The Singapore High Court has given full effect to the doctrine of competencecompetence since the arbitral tribunal gets the first priority to determine issues even with respect to the very existence of the arbitration agreement, while the jurisdiction of the courts is limited to a prima facie determination – s.16 of the Arbitration Act recognizes the doctrine of competence-competence in Indian arbitration law. [Paras 115, 117, 118, 119, 120] Doctrines / Principles – Doctrine of competence-competence –Positive and negative aspects of the doctrine – Negative competence-competence – Discussed. Held (per Dr. D.Y. Chandrachud, CJI) (for himself, Sanjay Kishan Kaul, B.R Gavai, Surya Kant, J B Pardiwala and Manoj Misra, JJ.): The international arbitration law as well as domestic law prioritize the arbitral tribunal by permitting them to initially decide challenges to their authority instead of the courts – The policy consideration behind this approach is twofold: first, to recognize the mutual intention of the parties of choosing the arbitrator to resolve all their disputes about the substantive rights and obligations arising out of contract; and second, to prevent parties from initiating parallel proceedings before courts and delaying the arbitral process – This is the positive aspect of the doctrine of competence-competence – The negative aspect, in contrast, speaks to the national courts – It instructs the courts to limit their interference at the referral stage by deferring to the jurisdiction of the arbitral tribunal in issues pertaining to the existence and validity of an arbitration agreement – Allowing arbitral tribunals to first rule on their own jurisdiction and later allowing the courts to determine if the tribunal exercised its powers properly safeguards both the power and authority of the arbitral tribunal as well as the courts – The negative aspect of the doctrine has been expressly recognized by Indian courts – Considering both the positive and negative facets, the principle can be defined as a rule whereby arbitrators must have the first opportunity to hear challenges relating to their jurisdiction, which is subject to subsequent review by courts. [Paras 129, 130] Arbitration and Conciliation Act, 1996 – Arbitration Act is a legislation enacted to inter alia consolidate the law relating to arbitration in India – It will have primacy over the Stamp Act and the Contract Act in relation to arbitration agreements. [Para 166 in judgment of Dr. D.Y. Chandrachud, CJI] Interpretation of Statutes – Harmonious construction – Provisions contained in two statutes must be, if possible, interpreted in a harmonious manner to give full effect to both the statutes – In providing a harmonious interpretation, the Court has to be cognizant of the fact that it does not defeat the purpose of the statutes or render them ineffective. [Para 165 in judgment of Dr. D.Y. Chandrachud, CJI] Interpretation of Statutes – Non-obstante clause – Held: Although a non-obstante clause must be allowed to operate with full vigour, its effect is limited to the extent intended by the legislature. [Para 77 in judgment of Dr. D.Y. Chandrachud, CJI] Words and Phrases – “admissible”. [Para 44 in judgment of Dr. D.Y. Chandrachud, CJI] Words and Phrases – Word “shall” – In ss.33 and 35 of the Stamp Act – Meaning and effect of. [Para 189 in judgment of Dr. D.Y. Chandrachud, CJI]
Judge	Hon'ble Dr. Justice D.Y. Chandrachud
Neutral Citation	2023 INSC 1066
Petitioner	In Re: Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899
SCR	[2023] 15 S.C.R. 1081
Judgement Date	2023-12-13
Case Number	44

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