The enforceability of unstamped or inadequately stamped arbitration agreements came into question before the Supreme Court of India, in Weatherford Oil Tool Middle East vs Baker Hughes Singapore Pte. The appellant supplies equipment and consumables to the respondent, who is a service provider to Vedanta Ltd.
The case was over the termination of three service agreements by Baker Hughes. Weatherford wanted arbitration, but the respondent opted for mediation. When mediation failed, the respondent pointed out that only one of the three agreements was stamped, as required by Maharashtra Stamp Act — the determination of stamp duty was pending with the Collector.
The Supreme Court agreed with the appellant that insufficient payment of stamp duty was a “curable defect” and it must look at the case’s substantive issues.
“As held by this Court in NN Global Mercantile, there is no legal impediment to the enforceability of the arbitration agreement pending payment of stamp duty on the substantive contract.”
Vexing issue
As advocate Karan Kamath points out in an article in IndiaCorpLaw, arbitration agreements in unstamped documents have been controversial. In January 2022, a three-member bench of the Supreme Court, in InterContinental Hotels Group (India) vs Waterline Hotels, referred the general issue of enforceability of unstamped or inadequately stamped agreements to a Constitution Bench.
In Weatherford Oil Tool vs Baker Hughes, the Supreme Court said: “Of course, the said issue is pending under consideration by the Constitution Bench, nonetheless, the matters which are still pending at a pre-appointment stage cannot be left hanging until the larger Bench settled the issue.”