The Delhi High Court on August 26, 2022 in the matter of Drooshba Fabricators v. Indue Private Limited held that the court while exercising jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996 (“A&C Act”) should impound the unstamped/I nadequately agreement and direct the parties to cure the defect before the arbitrator could adjudicate upon such an agreement.

In the instant matter a petition was filed under Section 11 of the A&C Act seeking appointment of an arbitrator to adjudicate upon the disputes arisen with the respondent stated in the work order (agreement). It was contented by the respondent that since the work order is not stamped, the arbitration clause embedded in it is not enforceable in law and cannot be acted upon unless the requisite stamp duty is paid. It was contented by the petitioner that under Schedule 1A of the Indian Stamp (Delhi Amendment) Act, 2010, a ‘work order’ is not required to be compulsorily stamped.

The court relied on earlier judgments of the Supreme Court in the matter of N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited and Intercontinental Hotels Group (India) Pvt. Ltd. v. Waterline Hotels Pvt. Ltd. where it was held that non-payment of stamp duty does not invalidate the arbitration clause, therefore, the courts at the stage of appointing an arbitrator cannot refuse to exercise jurisdiction on this ground.

Thus, the court held that non-payment or insufficiency of stamp duty on the underlying agreement cannot render the arbitration clause invalid and the petition was allowed.