Recently, the Supreme Court (SC) of India, through a seven-judge Constitution Bench, announced an important decision with implications for commercial arbitration in the country. The bench pronounced that arbitration agreements that are part of unstamped or insufficiently-stamped substantive commercial contracts are not invalid, unenforceable, or non-existent.
The Chief Justice of India explained that non-stamping or inadequate stamping is a curable defect. Thus, under the Indian Stamp Act 1899, non-payment or insufficient stamping of contracts will not affect arbitration proceedings governed by the Arbitration and Conciliation Act 1996. Provisions from other laws cannot interfere with the workings of the Arbitration Act. This judgment enhances India’s aim to become an international hub for quick resolution of commercial disputes.
Alternative Dispute Resolution (ADR) Mechanisms in India
India has several forms of Alternative Dispute Resolution (ADR) mechanisms. These include Arbitration, Conciliation, Mediation, and Negotiation.
In Arbitration, disputes are submitted to an arbitral tribunal which delivers a decision (an “award”) on the dispute that is mostly binding on the parties. The process is less formal than a trial, and there is usually no right to appeal an arbitrator’s decision.
Conciliation is a less formal form of arbitration, where an impartial third party assists in reaching a mutually satisfactory settlement of the dispute. The parties have the autonomy to accept or reject the recommendations.
Mediation involves an impartial mediator assisting parties in reaching a mutually acceptable resolution. The mediator doesn’t decide the dispute but helps the parties communicate to resolve the dispute themselves.
Negotiation is a non-binding procedure where discussions between parties are initiated without any third-party intervention, aiming for a negotiated settlement to the dispute.
The Arbitration and Conciliation (Amendment) Act, 2019
The Arbitration and Conciliation (Amendment) Act, 2019 seeks to establish an independent body called the Arbitration Council of India (ACI). It is aimed at promoting arbitration, mediation, conciliation, and other alternative dispute redressal mechanisms.
The ACI will consist of a Chairperson who can be a Supreme Court Judge, a High Court Judge, or an eminent person with expert knowledge in arbitration. Other members will include eminent arbitration practitioners, academicians with experience in arbitration, and government-appointed individuals.
Legal Insights and Examination Questions on the Subject
This Supreme Court decision brings clarity to the legal community about the status of unstamped or insufficiently-stamped arbitration agreements.
