Arbitral Tribunal Cannot Proceed with Award Based on Unstamped Agreement: Orissa High Court Quashes Award for Patent Illegality

“It shocks the conscience of this Court that despite the Lease Agreement being impounded, the Arbitrator proceeded to pass an award.” –  Orissa High Court in a landmark judgment setting aside an arbitral award for being rendered on the basis of an unstamped and unregistered lease agreement. Justice Dr. S.K. Panigrahi, while invoking Article 227 of the Constitution of India, held that “an award rendered on an unstamped document is a nullity and cannot survive the test of law.” 
The petitioner challenged an award dated 01.08.2022 which directed payment of Rs. 4.31 crores on the basis of a Lease Agreement dated 01.05.2012. The Agreement was executed on a Rs.100 stamp paper and was admittedly unregistered. The petitioner had earlier moved the Court, alleging that the Arbitral Tribunal continued proceedings without ensuring that the document was adequately stamped or registered, despite earlier orders mandating impoundment. 
“The Arbitral Tribunal did not have jurisdiction to pass any award till the time the existence and validity of the Lease Agreement had been revived by payment of appropriate stamp duty.” 
The Court traced the procedural history and recorded that the Lease Agreement was already held by the Arbitral Tribunal itself as “liable to be impounded” since it was “not properly stamped nor registered.” Yet, the arbitrator proceeded to pass an award without awaiting the curing of that defect. 
Justice Panigrahi observed, “This Court and the Ld. Sole Arbitrator are bound by the law declared by the Supreme Court. Without curing the defect and without endorsement under Section 42 of the Indian Stamp Act, the agreement remains inadmissible.” 
“Suppression or concealment of material facts is not advocacy; it is a jugglery, manipulation, manoeuvring or misrepresentation, which has no place in equitable and prerogative jurisdiction.” 
Expressing sharp disapproval of the conduct of the respondent, the Court stated, “It shocks the conscience of this Court, that this material fact was not brought to the conscious attention of this Court in W.P.(C) No. 3203 of 2022.” The respondent had failed to inform the Court that the Lease Agreement had already been impounded and proceeded ex parte to secure directions for early conclusion of arbitration. The Judge noted, “This Court is not a laboratory where parties come to experiment…justice must not only be done to parties, but also to this Court.” 
“An unstamped arbitration agreement is not a curable defect. It is void.” 
Referring to the majority view in N.N. Global Mercantile (P) Ltd. V. Indo Unique Flame Ltd., (2023) 7 SCC 1, the Court recalled the Supreme Court’s finding that, “As long it remains an unstamped instrument, it cannot be taken notice of for any purpose as contemplated in Section 35 of the Stamp Act. It remains unenforceable. It is not enforceable in law. In the said sense, it also cannot exist in law. It would be void.” 
However, the Orissa High Court harmonized this with the 2024 Constitution Bench ruling in Interplay Between Arbitration Agreements under Arbitration Act & Stamp Act, In re (2024) 6 SCC 1, holding that stamp defects are curable. The Court affirmed, “The non-payment of stamp duty is accurately characterised as a curable defect. The Stamp Act provides the method for curing the defect. There is no procedure by which a void agreement can be cured.” 
“Writ jurisdiction is not ousted under Section 5 of the Arbitration and Conciliation Act – it must be exercised in exceptional rarity where justice is at stake.” 
Addressing the maintainability of the writ petition under Article 227, the Court relied on Deep Industries Ltd. V. ONGC Ltd., 2019 SCC OnLine SC 1602, holding that, “Though petitions can be filed under Article 227 against judgments allowing or dismissing appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering, restricting it to orders that are patently lacking in inherent jurisdiction.” 
Justice Panigrahi also emphasized the Supreme Court’s caution that, “Excessive judicial interference in arbitral process is not encouraged. But in a case where the defect stares in the face and illegality is manifest, judicial intervention is warranted.” 
“Once impounded, the document must go to the Collector, and only upon endorsement of payment can arbitration resume.” 
The Court directed that the Lease Agreement be sent to the Collector under Section 38 of the Indian Stamp Act for assessment and collection of appropriate stamp duty. The Judge made It clear that, “The arbitration proceedings shall remain in abeyance till the Collector endorses that the proper stamp duty has been paid under Section 42. Thereafter, the endorsed document shall be returned to the Ld. Sole Arbitrator, and the arbitration shall proceed.” 
Clause 19 of the Lease Agreement stated, “The Lessee shall have the present lease duly registered at its own cost and pay the stamp duty applicable… It shall be open to the Lessor to pay the stamp duty or the deficiency of the same and recover the same from the Lessee.” On this basis, the Court clarified that the stamp duty shall be borne by the parties as per the agreement. 
“Justice must not only be done, but must be seen to be done – and seen to be done lawfully.” 
Concluding the judgment, Justice Panigrahi remarked, “This Court believes that the present matter comes within the meaning of ‘exceptional’, and writ jurisdiction ought to be exercised in the face of such patent illegality.” 
He further held, “The Impugned Order/Award is set aside. Upon compliance with the Stamp Act, the arbitration may resume. Until then, the proceedings shall remain in abeyance. Ordered accordingly.” 
Date of Decision: 11 April 2025