A seven-judge bench will review the Supreme Court’s April arbitration award.


New Delhi: Citing “unlimited uncertainty in the area of ​​arbitration” at present, the Supreme Court on Tuesday preferred a seven-judge bench to review its April ruling that the arbitration clause was unenforceable. If the contract is unsealed or insufficiently sealed.

The April ruling was expected to further delay the appointment of arbitrators by adding another layer of scrutiny, in addition to going against India’s pro-arbitration stance.

“Given the larger implications and implications of the majority approach in the NM Global case, these proceedings should be placed before a seven-judge bench to reconsider the correctness of the five-judge bench’s approach.” A constitution said. The bench, headed by Chief Justice of India Dhananjaya Y Chandrachud.

A five-judge constitution bench was hearing a curative petition, seeking a review of the April 25 verdict.

The April judgment, by a majority of 3-2, largely relied on the Indian Stamp Act of 1899 which required certain contracts to be registered or chargeable to stamp duty, while it said that A court may well consider stamping and other compliance aspects before an arbitrator. is determined.

Sushmita Gandhi, partner at Indus Law, said the April decision had a major impact on the arbitration space. “Given the impact of the decision on pre- and post-award arbitral proceedings and the fact that it was also inconsistent with the existing arbitral system causing uncertainty and delay, it may be time to refer the larger bench. It was about.” he added.

Manmeet Singh, senior partner at Saraf & Partners, said the decision was actually a step backwards for the current pro-arbitration government in India and opened a Pandora’s box. “Seeing a curable defect like stamp duty at the time of appointment of arbitrator not only delays the commencement of the proceedings but also opens the door for judicial intervention in the arbitration by going into the nature of a larger contract. The threshold, thus, for hearing a curative petition. Agreeing, the Supreme Court has also seen merit in re-examining the matter,” Singh added.

During Tuesday’s proceedings, the constitution bench termed it a “very important” matter to decide to clarify the arbitration system in the country.

“Arbitrators across the country are faced with situations where they are told that contracts have not been sealed and therefore reopen the case. There is infinite uncertainty in the field of arbitration right now. should end,” the bench observed.

Senior advocate Shyam Dewan, appearing for one of the parties in the matter, objected to the resumption of his case. Datar said the court should leave aside his client’s specific facts as the issues in his case were no longer alive.

But the bench said it would need a live case to review the April verdict. “We want this case to be decided. We do not want it to be diverted. The legality of the arbitration system is more important than the technical objections,” the court said, adding that it fixed October 11 as the next date of hearing. has been done .

The court has appointed advocates Partha Sreekumar and Debesh Panda as nodal advocates in the case to prepare a joint compilation of documents and submissions in the case and coordinate with all the lawyers in the case to facilitate the proceedings. can go.

The judgment, dated April 24, decided a bundle of judgments since 2011, which had taken different views on the enforceability of arbitration clauses contained in unsealed or insufficiently sealed contracts.

The majority judgment referred to the mandate of the Stamp Act which states that “an instrument which is liable to stamp duty may contain an arbitration clause and which is not stamped cannot be said to be an enforceable contract in law.” “.

It further held that an arbitration agreement within the meaning of the Arbitration and Conciliation Act, 1996 attracts stamp duty and if it is not stamped or insufficiently stamped, it is subject to Section 35 of the Stamp Act. Cannot be executed which defines the terms of a valid instrument. . Section 35 of the Stamp Act provides that no dutiable instrument shall be admitted in evidence or processed for any purpose unless such instrument is duly stamped. It further noted that an unstamped or insufficiently stamped instrument should be authenticated by payment of the requisite duty before being admitted as evidence in an arbitration case. According to the majority, the court is bound to scrutinize the instrument at the pre-appointment stage and if it is found to be unstamped or inadequately sealed, the instrument itself will be impounded at that stage.

Two other judges of the bench, comprising the minority, dismissed concerns that the approach taken by the majority in the judgment tended to frustrate the purpose of the Arbitration and Conciliation Act, as stamp duty at the threshold The check may stop. This will lead to procedural and procedural complexity and delay in litigation before the courts.

They held that the copy or certified copy of the arbitration agreement, whether unstamped or insufficiently stamped, is an enforceable document for the appointment of an arbitrator, at the stage prior to the reference. Once an arbitrator or an arbitral tribunal has been appointed, the minority view said, the validity of the contract can go for an appropriate adjudication at a later stage without impeding the process.

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