This week in Indian law: A five-judge Supreme Court bench in NN Global ruled that unstamped or insufficiently stamped arbitration agreements are void ab initio and unenforceable, creating significant disruption in arbitration practice. The NCLAT reaffirmed the non-justiciability of the Committee of Creditors' commercial wisdom in approving resolution plans. 2 significant legal developments this week across supreme-court-judgments and corporate-insolvency.
Top story
SC Five-Judge Bench Rules Unstamped Arbitration Pacts Invalid
Category: supreme-court-judgments | Date: 25 April 2023 | Source: Supreme Court of India
A five-judge bench of the Supreme Court in NN Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. held that an arbitration agreement contained in an instrument that is not stamped or is insufficiently stamped is void ab initio and cannot be acted upon. The majority (3:2) ruled that the deficiency in stamp duty affects the very existence of the contract, including the arbitration clause, and courts cannot refer parties to arbitration under Section 11 of the Arbitration and Conciliation Act, 1996 unless the stamp duty deficiency is cured. Justices Ajay Rastogi and Hrishikesh Roy dissented, holding that an arbitration clause is severable from the underlying contract and stamp duty issues do not render it void.
Why it matters: This judgment created significant uncertainty for ongoing and prospective arbitrations, as many commercial contracts across India may not be properly stamped. Practitioners must ensure all arbitration agreements are adequately stamped before invoking arbitration. Note: This ruling was subsequently overruled by a seven-judge bench in December 2023 in In Re: Interplay between Arbitration Agreements under the Arbitration Act and the Indian Stamp Act.
Read more: Veritect analysis
Corporate and insolvency
NCLAT Reaffirms Non-Justiciability of CoC Commercial Wisdom
Date: 24 April 2023
The National Company Law Appellate Tribunal reaffirmed that the commercial wisdom exercised by the Committee of Creditors (CoC) in evaluating and approving a resolution plan is non-justiciable. The NCLAT held that neither the adjudicating authority (NCLT) nor the appellate tribunal can interfere with the CoC's commercial assessment of a resolution plan's viability, except on limited grounds such as non-compliance with mandatory IBC provisions.
Key point: Courts and tribunals cannot substitute their commercial judgment for the CoC's assessment; interference is limited to illegality, not commercial wisdom.
Also this week
- April 29-30 weekend — No significant developments on the weekend; courts not in session.
- Same-sex marriage — SC Constitution Bench arguments concluded; judgment reserved.
- Article 142 divorce — Constitution Bench judgment expected on 1 May in Shilpa Sailesh v. Varun Sreenivasan.
Looking ahead
- May 1: SC Constitution Bench to deliver landmark Article 142 divorce judgment.
- May 3: Manipur ethnic violence likely following HC order on Meitei ST status.
- May 11: SC expected to deliver two major Constitution Bench judgments — Maharashtra political crisis and Delhi governance.
This is the Veritect Weekly Legal Roundup for Week 17 of 2023. For daily updates, visit our legal news page. Subscribe to receive this roundup every Monday morning.
Veritect provides this content for informational purposes and does not constitute legal advice.