IN THE SUPREME COURT OF INDIA: CIVIL APPELLATE JURISDICTION
Subject: ARBITRATION MATTER S.L.P. (CIVIL) NO.31311/2011 Date of Disposal: 13/07/12
Title: NAINA THAKKAR VERSUS M/S ANNAPURNA BUILDERS
4.
In M/s SMS Tea Estates Pvt. Ltd. Vs M/s Chandmari Tea Co. Pvt. Ltd
(2011 (7) SCALE 747 case (supra), this Court was concerned with,
inter alia, two questions -
(i)
Whether an arbitration agreement contained in an unregistered
(but compulsorily registrable) instrument is valid and enforceable?,
and
(ii) Whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable?
5.
While dealing with question (i), the Court referred to statutory
provisions contained in Sections 17(1)(d) and 49 of the Registration
Act, 1908, Section 107 of the Transfer of Property Act, 1882, Section
19 of the Indian Contract Act, 1872 and Section 16 of the Act.
While dealing with question (ii), the Court referred to Sections 33,
35, 38 and 40 of the Indian Stamp Act, 1899 and Section 49 of the
Registration Act, 1908. The Court then summed up the procedure to
be adopted where the arbitration clause is contained in a document
which is not registered (but compulsorily registrable) and which is not
duly stamped as under :
(i)
The court should, before admitting any document into evidence or
acting upon such document, examine whether the instrument/document is
duly stamped and whether it is an instrument which is compulsorily
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 terms of the document, even if
the document itself cannot in any way affect the property or cannot be
received as evidence of any transaction affecting such property. The
only exception is where the respondent in the application
demonstrates that the arbitration agreement is also void and
unenforceable, as pointed out in para 8 above. If the respondent
raises any objection that the arbitration agreement was invalid, the
court will consider the said objection before proceeding to appoint
an arbitrator.
(vi) Where the
document is compulsorily registrable, but is not registered, but
the arbitration agreement is valid and separable, what is required to
be borne in mind is that the Arbitrator appointed in such a
matter cannot rely upon the unregistered instrument except for
two purposes, that is (a) as evidence of contract in a claim for
specific performance and (b) as evidence of any collateral
transaction which does not require registration."