GARWARE WALLS ROPES LTD. V. COASTAL MARINE CONSTRUCTIONS AND ENGINEERING LTD

Core Point: An arbitration clause inside an unstamped contract cannot be used until the document is properly stamped under the Stamp Act.

The Supreme Court said the clause is separate (severability), but not independent when the main contract itself fails stamping. First, impound and pay stamp duty/penalty. Only then can Section 11 or any arbitration step move forward.

• Is an arbitration agreement in an unstamped document enforceable?

The Supreme Court set aside the Bombay High Court’s view. It held that an arbitration agreement in an unstamped contract cannot be invoked. The document must be impounded. After the deficit stamp duty and penalty are paid, the court may then consider the arbitration clause and any request under Section 11.

• Arbitration clause is separate but not fully independent from stamping requirements.
• Impounding and payment of stamp duty/penalty are pre-conditions to enforce the clause.

It warns drafters and in-house teams: get stamping right. If the contract is unstamped, you can lose time at the very start of a dispute because the court cannot act on the arbitration clause.

1. Stamp first, arbitrate next.
2. Severability ≠ immunity from Stamp Act.
3. Courts must impound unstamped agreements before Section 11.

Mnemonic: “Stamp, Then Start” — No stamp, no start to arbitration.

1. Check: Is the contract duly stamped?
2. Fix: If not, impound & pay duty/penalty.
3. Proceed: Now use the arbitration clause/Section 11.

Severability

Arbitration clause is separate from the main contract for validity questions.

Impounding

Court action to hold an unstamped/insufficiently stamped instrument until duty/penalty is paid.

Section 11

Provision for court appointment of arbitrators when parties do not appoint as agreed.