What is the ruling of the Constitution Bench on arbitration agreements in unstamped contracts
The Constitution Bench states that arbitration agreements in unstamped contracts are valid.
The ruling of the Constitution Bench on arbitration agreements in unstamped contracts can be summarized as follows:
- The Constitution Bench held that the requirement of stamping should not be a bar to the enforceability of arbitration agreements.
- The Bench stated that the validity of an arbitration agreement does not depend on whether the underlying contract is stamped or not.
- It was clarified that Section 11 of the Arbitration and Conciliation Act, 1996, which deals with the appointment of arbitrators, does not require the court to examine the legality of the underlying contract.
- The Bench emphasized that arbitration is an alternate dispute resolution mechanism that promotes the speedy resolution of disputes, and therefore, the validity of an arbitration agreement should not be defeated on technical grounds.
- However, the Bench also mentioned that unstamped contracts may face potential consequences like payment of stamp duty and penalty, as per the respective stamp duty laws of the state.
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