(ii) An arbitration agreement in an unregistered agreement that is not properly stamped valid and enforceable? Recently, a three-judge panel of the Supreme Court ruled in N.N. Global Mercantile (P) Ltd.c. Indo Unique Flame Ltd.[1] on the effect of an arbitration clause in a contract that needs to be stamped and clarified the legal basis of the doctrine of separating arbitration agreements from the underlying contract and also ruled on the arbitrability of fraud-related disputes. The Supreme Court ruled: The court established guidelines for the treatment by a court of an arbitration agreement contained in an unregistered (but registrable by force) instrument that is not properly stamped as follows: The Court of Honor concluded that an arbitration agreement contained in a contract was a secured transaction that had nothing to do with the performance of the main contract. Next, he went on to state that an arbitration clause contained in a main contract is like two contracts in a single contract – the first contract is for the main transaction provided for in the contract and the second contract is the arbitration agreement. Thus, in this case, the deed of lease was as if two contracts had been combined into one – one for the rental of the property for 30 years, which was compulsorily registrable, and the other for the settlement of disputes under the contract, which is not necessarily registrable under the Registration Act. In order to further support this interpretation, i.e. the arbitration agreement, which is a separate agreement from the main contract, the Court relied on the provisions of section 16 of the Arbitration Act (mentioned above), which states that for the purposes of an arbitrator who decides on his or her jurisdiction, „. an arbitration clause forming an integral part of a contract is treated as an agreement independent of the other clauses of the contract. The Court of Honour concluded that, therefore, „. even if an instrument for the transfer of immovable property is challenged as invalid or enforceable, the arbitration agreement is not affected for the purpose of resolving disputes arising from the instrument of transfer. ». It is important to remember that the Stamp Act applies to the agreement or transfer as a whole. It is therefore not possible to fork the arbitration clause contained in such an agreement or transfer in order to allow it to exist independently, as the defendant argued. By order of 28.5.2010, the Learned Chief Justice of the Guwahati Supreme Court rejected the applicant`s application on the ground that the deed of lease was compulsorily registrable in accordance with section 17 of the Registration Act and section 107 of the TP Act and, as the deed of lease was not registered, no clause of the deed of lease could be invoked for any purpose, therefore, Article 35 cannot be used to request arbitration.

The High Court also held that the arbitration agreement contained in section 35 could not be characterized as collateral transaction and that, therefore, the reservation to section 49 of the Registration Act would not assist the appellant. The Court first concluded that under the provisions of section 17 of the Registration Act and section 107 of the GST Act, a document relating to the leasing of real property for a period of more than one year is compulsorily registrable. The Court then noted the effects of not registering a document that could be compulsorily registered, as set out in section 49 of the Registration Act – that this does not affect the immovable property it contains and confers the power to be accepted or obtained as evidence of a transaction concerning or conferring such power as evidence. However, the document is likely to be used for two limited purposes – as evidence of a contract in a proceeding for a particular service and as evidence of any collateral transaction that is to be carried out by a registered instrument. The Court noted that a „collateral transaction“ is a transaction that affects ownership, but .“ an operation which, moreover, is linked to that operation. The question therefore arose as to whether an arbitration clause contained in an unregistered document (which may be compulsorily registered) constitutes a „collateral transaction“ in order to be subject to section 49 of the Registration Act and to be received as evidence. Even if an agreement is not stamped or registered, the arbitration clause is independent and unambiguous. This is called the theory of competences, which was already established by the French Court of Justice in 1963. It took nearly 50 years to adopt the international perspective. We will get to know the theory of skills in our next blog. The decision is of interest to parties dealing with real estate transactions as it confirms that parties must be vigilant about the legal requirements for registering and stamping an instrument. Although the Supreme Court held in this case that the arbitration agreement contained in an unregistered (but compulsorily registrable) instrument was valid and enforceable, it limited the extent to which an arbitrator may rely on the unregistered document to two circumstances (as proof of contract in a claim for a particular service and as evidence of collateral transaction, which does not require registration).

In fact, arbitration procedures relating to disputes arising from an unregistered lease deed have been abolished. In most cases, an arbitrator appointed under such an instrument would have his hands tied with respect to most matters arising from such a document. Therefore, any breach by the parties of the registration obligation would render the arbitration clause it contains of little or no value, even if it were found to be enforceable. Therefore, given the provisions of section 35 of the Stamp Act, the court can only react to that document if the stamp duty and penalty due on the document are paid. . an arbitration clause that forms part of a contract is considered to be an agreement independent of the other terms of the contract. A decision of the arbitral tribunal on the nullity of the contract does not ipso jure entail the nullity of the arbitration clause. Lord Wright said in his statement: „An arbitration agreement is a guarantee for the essential provisions of the Treaty. It is simply procedural and incidental, it is a means of settling disputes, although the agreement on this subject is itself subject to the discretion of the court.

However, this article also makes an exception to the above rule and stipulates that an unregistered document that relates to real estate and must be registered may be used for the following purposes: To rule on this matter, the Court of Honor has certain relevant provisions of the Stamps Act (mentioned above), including Section 33, which requires that any person, who is authorized by law or with the consent of the parties to obtain evidence, and before whom a document is made that, in his opinion, is not properly stamped, then he is obliged to confiscate that document and process it in the manner prescribed in section 38 of the Stamps Act. . . .

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