TMI Blog2011 (7) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... es for 30 years as lessees or reimburse the amounts invested by it in the two estates and the payments made to the Bank. The Guwahati High Court dismissed the appellant's application. He held that the lease deed was compulsorily registrable u/s 17 of the Registration Act and section 106 of the TP Act; and as the lease deed was not registered, no term in the said lease deed could be relied upon for any purpose and therefore clause 35 could not be relied upon for seeking reference to arbitration. The High Court also held that the arbitration agreement contained in clause 35 could not be termed as a collateral transaction, and therefore, the proviso to section 49 of the Registration Act would not assist the appellant. The said order is challenged in this appeal by special leave. HELD THAT:- An arbitration agreement does not require registration under the Registration Act. Even if it is found as one of the clauses in a contract or instrument, it is an independent agreement to refer the disputes to arbitration, which is independent of the main contract or instrument. Therefore having regard to the proviso to section 49 of Registration Act read with section 16(1)(a) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent requested the said bank for issue of a no objection certificate for entering into a long term lease. The Bank sent a reply dated 17.7.2007, stating that it would issue a no objection certificate for the lease, if the entire balance amount due to it was deposited by 14.8.2007. 2.2) Prior to the execution of the said lease deed, on 29.11.2006 the respondent had offered to sell the two Tea estates to the appellant for a consideration of Rupees four crores. The appellant agreed to purchase them subject to detailed verification. The appellant wrote a letter dated 27.6.2007 to the respondent agreeing to purchase the said two Tea estates. 2.3) The appellant invested huge sums of money for improving the tea estates in the expectation that it would either be purchasing the said estates or have a lease for 30 years. The respondent however abruptly and illegally evicted the appellant from the two estates and took over their management in January 2008. The appellant thereafter wrote a letter dated 28.3.2008 to the respondent expressing its willingness to purchase the said two estates for a mutually agreed upon consideration and also discharge the liability towards the bank. 2.4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion : (i) Whether an arbitration agreement contained in an unregistered (but compulsorily registrable) instrument is valid and enforceable? (ii) Whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable? (iii) Whether there is an arbitration agreement between the appellant and respondent and whether an Arbitrator should be appointed? Re : Question (i) 6. Section 17(1)(d) of Registration Act and section 107 of TP Act provides that leases of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument. Section 49 of the Registration Act, 1908, sets out the effect of non-registration of documents required to be registered. The said section is extracted below : 49.Effect of non-registration of documents required to be Registered.- No document required by section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall-- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is as if two documents - one affecting the immovable property requiring registration and the other relating to resolution of disputes which is not compulsorily registrable - are rolled into a single instrument. Therefore, even if a deed of transfer of immovable property is challenged as not valid or enforceable, the arbitration agreement would remain unaffected for the purpose of resolution of disputes arising with reference to the deed of transfer. These principles have now found statutory recognition in sub-section (1) of section 16 of the Arbitration and Conciliation Act 1996 (`Act' for short) which is extracted below : 16. Competence of arbitral tribunal to rule on its jurisdiction. (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,-- (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act provides that instruments not duly stamped is inadmissible in evidence and cannot be acted upon. The relevant portion of the said section is extracted below : 35. Instruments not duly stamped inadmissible in evidence, etc. -- No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped : Provided that-- (a) any such instrument shall be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion. x x x x x Having regard to section 35 of Stamp Act, unless the stamp duty and penalty due in respect of the instrument is paid, the court cannot act upon the instrument, which means that it cannot act upon the arbitration agreement al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulsorily registrable. (ii) If the document is found to be not duly stamped, Section 35 of Stamp Act bars the said document being acted upon. Consequently, even the arbitration clause therein cannot be acted upon. The court should then proceed to impound the document under section 33 of the Stamp Act and follow the procedure under section 35 and 38 of the Stamp Act. (iii) If the document is found to be duly stamped, or if the deficit stamp duty and penalty is paid, either before the Court or before the Collector (as contemplated in section 35 or 40 of the Stamp Act), and the defect with reference to deficit stamp is cured, the court may treat the document as duly stamped. (iv) Once the document is found to be duly stamped, the court shall proceed to consider whether the document is compulsorily registrable. If the document is found to be not compulsorily registrable, the court can act upon the arbitration agreement, without any impediment. (v) If the document is not registered, but is compulsorily registrable, having regard to section 16(1)(a) of the Act, the court can de-link the arbitration agreement from the main document, as an agreement independent of the other term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lessee/second party in context with the above mentioned scheduled property. Having regard to the limited scope of the said arbitration agreement (restricting it to disputes in relation to or in any manner touching upon the lease deed), the arbitrator will have no jurisdiction to decide any dispute which does not relate to the lease deed. Though the Arbitrator will have jurisdiction to decide any dispute touching upon or relating to the lease deed, as the lease deed is unregistered, the arbitration will virtually be a non-starter. A party under such a deed may have the luxury of having an arbitrator appointed, but little else. Be that as it may. 15. Before an Arbitrator can be appointed under section 11 of the Act, the applicant should satisfy the learned Chief Justice or his designate that the arbitration agreement is available in regard to the contract/document in regard to which the dispute has arisen. For example if the parties had entered into two agreements and arbitration clause is found only in the first agreement and not in the second agreement, necessarily an arbitrator can be appointed only in regard to disputes relating to the first agreement and not in regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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