Understanding Non-Judicial Stamp Paper Requirements for Long-Term Settlements: What Are the Legal Essentials?

Dear Colleagues,

I have come across many long-term settlements, including settlements under Section 18(3), which have been signed on non-judicial stamp paper, mostly having a value of Rs. 100/-. Can you please highlight the legal requirements of non-judicial stamp paper, preferably with the relevant Section?

Settlements under Section 12(3) and Section 18(1)

Settlements under Section 12(3) and settlement under Section 18(1) are typed on plain paper only. Non-judicial stamp paper is not a requirement under law.

Sec 12(3)

If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings, the memorandum of the settlement is signed by the parties to the dispute before the Conciliation Office. Such agreements stand as binding to the employer and its employees in the organization.

Sec 18(1)

Whenever a dispute arises between the employer and its workmen, they come to a settlement after mutual discussions without any third-party intervention and settle the disputes, arrived at by agreement between the employer and the workman concerned. The memorandum of settlement has to be sent to the respective Conciliation Officer for registration and a copy to the respective labor department of the government. This memorandum of settlement shall be binding on the parties to the agreement/settlement only.

Basically, it is a mutual settlement or agreement between the parties; thus, it constitutes a contract, legally speaking. A valid contract can be documented on any paper or even be oral. The validity or binding nature of the contract is not affected by whether it is executed on non-judicial stamp paper or not. Creating a contract on non-judicial stamp paper does not enhance its legal value, but it certainly appears to be a legal document consciously executed by the parties.

Legal Requirements for Stamp Paper Agreements

All agreements need to be on stamp paper. If not, in case of a dispute, the court may ask you to pay the stamp duty (10 times the normal duty) before admitting the document as evidence.

Determining the Value of Stamp Paper

Whether you use 100 or 500 rupees stamp paper depends on the stamp rules of the concerned states. You need to check with your lawyer for the correct information.

Dear friends,

The Indian Stamps Act, 1899 provides for stamp duty in respect of instruments mentioned in its Schedule I, read with Section 3 of the Act. Agreements, settlements, or awards under the Labor Laws do not find a place there. The Industrial Disputes Act, 1947, under which such instruments are made, also does not prescribe any stamp duty on them. Therefore, it is sufficient that settlements made under the Labor Laws can be reduced to writing on plain paper.

I believe we should know such things, so even though it is legal, I would be happy to see such questions (especially as they are related to HR/IR functions) posted here. I hope there is no specific rule on the forum against having such questions.