Mumbai High Court – Courts Can Act u/s 9 of Arbitration Act Despite Unstamped Agreement

Under the L&T Finance Limited v. Diamond Projects Limited and 4 Other Petitions, the Bombay High Court (“HC”) has stated that under Section 9 of the Arbitration and Conciliation Act (“Act”), there is no requirement to determine the Arbitration Agreement’s validity. The HC further cleared that an interim relief should be provided on a three-fold test that comprises (a) prima facie case (b) balance of convenience and (c) irreparable injury.

In addition, the decision of HC also stated that any insufficiently or inadequately stamped document/agreement/instrument will not preclude any party from seeking interim measures according to the provisions available under Section 9 of the Act.

At a pre-arbitral hearing, the HC heard five petitions seeking interim relief/measures. It was determined on the basis that all matters were similar since each Respondent had contested the petition on the grounds that the arbitration agreement or arbitration clause in the agreement/instrument was insufficiently stamped or unstamped in accordance with the Indian Stamp Act or Maharashtra Stamp Act; therefore it cannot be considered an existent agreement and cannot be enforced.

As the Court concluded, granting interim measures cannot be hindered by a document’s inadmissibility based on its lack of a duly stamped seal. When a document is produced for admission during evidence, the admissibility issue should be addressed later in the proceedings.

The Statement Issued By The Bombay High Court

In short, Section 9 enables the Court to exercise its jurisdiction and pass such orders, as are required to maintain substratum of the subject matter of the arbitration, though the Court may not return a finding on the merits of the claim made or a dispute raised by the parties before the Arbitrator.

It was also clarified that the Court can grant interim relief under Order XXXIX of the CPC even if the underlying documents are not properly stamped. It was also clarified that the power available under Section 9 should be exercised in a similar way. In its ruling, the court stated that “The Court cannot be stopped in its tracks if it finds that the petitioner has made out a case for interim relief under Section 9.”