Unregistered arbitration, but stamped, agreements are valid: SC

NEW DELHI: The Supreme Court has ruled that the unregistered arbitration agreements are valid and can be enforced for the purpose of the resolution of the dispute between the parties. The apex court overruled a Guwahati High Hourt order which had said that the arbitration proceedings cannot be initiated on the basis of an unregistered agreement.

The court, however, said that if such deed is not duly stamped, it is not valid and cannot be acted upon by the arbitrator.

"Having regard to the proviso to section 49 of Registration Act read with Section 16(1)(a) of the Act (Arbitration & Conciliation Act, 1996), an arbitration agreement in an unregistered but compulsorily registrable document can be acted upon and enforced for the purpose of dispute resolution by arbitration," said a bench comprising Justice RV Raveendran and Justice AK Patnaik in its judgement on Wednesday.

The court said: "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."

The bench allowed the appeal of SMS Tea Estates. It had came to the apex court seeking order to appoint an arbitrator to sort out its dispute with the Chandmari Tea Co pertaining to the lease of two tea estates.

It was opposed by the Chandmari Tea Co on the ground that the lease deed signed between the two was unregistered and therefore invalid. It had further said that such deed was also not duly stamped and therefore was invalid, unenforceable and not binding. The high court had held that as the lease deed was not registered, no term of it can be relied upon for reference to arbitration.

Aggrieved, the appellant had came to the apex court, which set aside the high court order. The apex court asked the high court to decide the issue of stamp duty, and if the document is duly stamped, then appoint an arbitrator in accordance with the law.