Unstamped Arbitration Agreement Survives; Objection Must First Be Raised Before Arbitrator: Supreme Court

The Supreme Court on Wednesday held that non-stamping or insufficient stamping of an agreement does not invalidate it and that the arbitral tribunal must decide such objections in the first instance, discouraging High Court interference in ongoing arbitration proceedings.

A bench of Justice J.K. Maheshwari and Justice Atul S. Chandurkar held “The agreement survives non-stamping or insufficient stamping, and the defect can be cured by getting the agreement sufficiently stamped at any stage, whereupon it becomes admissible in the eyes of law. It is the arbitral tribunal that is empowered to deal with this issue in the first instance.”

The bench added, “The remedy of having the Tribunal satisfy itself on the question of stamping under Section 16, with the award remaining open to challenge at a later stage, is not inadequate.”

Dismissing an appeal filed by mine owner Tarini Prasad Mohanty against Sunflag Iron and Steel Company Limited, the Court upheld an Orissa High Court Division Bench judgment that had restored an arbitral tribunal order rejecting a stamping objection raised during arbitration proceedings.

The dispute arose out of an agreement for sale of iron ore dated February 12, 2004, executed between Mohanty and Sunflag Iron and Steel Company Limited. Supplementary agreements were subsequently entered into between the parties during their commercial relationship.

After disputes arose, the matter was referred to arbitration before a sole arbitrator. Sunflag, as claimant, made various claims against the mine owner, who in turn filed counterclaims.

During the arbitration proceedings, on February 5, 2024, the mine owner objected that the principal agreement and the supplementary agreements had been insufficiently stamped.

Its case was that the transactions were in the nature of a “conveyance”, attracting higher stamp duty, and that the arbitration could not proceed unless the agreements were first impounded and the deficit duty paid.

The sole arbitrator, by an order dated May 30, 2024, rejected the objection, holding that the agreements were merely “agreements to sell” and not conveyances or completed sales.

Mohanty then approached the Orissa High Court under Articles 226 and 227 challenging the arbitral tribunal's order and seeking directions for impounding of the agreements.

The single judge of the High Court, by a February 25, 2025 order, accepted the mine owner's challenge, finding that the agreements required proper stamping and directing that the documents be impounded.

That ruling was later set aside by the Division Bench in Sunflag's writ, which found that the High Court should not have stepped into the arbitral process while the proceedings were still underway.

Before the Supreme Court, the mine owner argued that the arbitral tribunal lacked jurisdiction to continue with the arbitration unless proper stamp duty had first been paid. It also argued that the High Court could exercise writ jurisdiction in exceptional cases where the arbitral tribunal's order was allegedly perverse.

Sunflag, on the other hand, argued that stamping objections fell within the arbitral tribunal's jurisdiction and could be challenged later after the final award.

Agreeing with Sunflag, the Supreme Court held that the single judge had exceeded writ jurisdiction by effectively entering into the merits of the dispute and reinterpreting the agreements while arbitration proceedings were still pending.

The bench held that the arbitral tribunal was competent to decide objections relating to stamping and that even an erroneous decision on merits would not amount to an inherent lack of jurisdiction justifying writ interference.

It further emphasized that the Arbitration Act contemplates minimal judicial interference during ongoing arbitral proceedings and that a rejected objection by the arbitral tribunal, including on stamping, can ordinarily be challenged after the final award.

Concluding that the Division Bench of the Orissa High Court was justified in restoring the arbitral tribunal's order, the Supreme Court dismissed the appeal while keeping open the parties' right to raise the stamping issue at the post-award stage.

For Appellant (Tarini Prasad Mohanty): Senior Advocate Shashank Garg.

For Respondent (M/s Sunflag Iron and Steel Company Limited): Senior Advocates Gopal Subramanium, N.K. Mody and Malvika Trivedi.