LexM/S. SMS TEA ESTATES PVT. LTD. versus M/S. CHANDMARI TEA CO. PVT. LTD.
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[2011] 9 S.C.R. 382 A M/S. SMS TEA ESTATES PVT. LTD. v. M/S. CHANDMARI TEA CO. PVT. LTD. (Civil Appeal No. 5820 of 2011) JULY 20, 2011 i B [R.V. RAVEENDRAN AND A.K. PATNAIK, JJ.) Arbitration and Conciliation Act, 1996: c ss. 11and16(1)(a) read with s.49 of Registration Act and ss. 33, 35, 38 and 40 of Stamp Act - Arbitration clause in an unregistered lease deed granting lease of two tea states for 30 years - Dispute between the parties - Application for appointment of arbitrator - Rejected by Chief Justice of High • D Court - HELD: An arbitration agreement does not require registration under the Registration Act - When a contract contains an arbitration clause, it is a collateral term relating to the resolution of disputes, unrelated to the performance of the contract - Therefore, having regard to the proviso to s. 49 E of Registration Act read with s.16(1)(a) of the 1966 Act, an arbitration agreement in an unregistered but compulsorily registrable document can be acted upon and enforced for the purpose of dispute resolution by arbitration - However, having regard to s. 35, unless the stamp duty and penalty due in respect of the instrument is paid, the court cannot act upon I-' F the instrument, which means that it cannot act upon the arbitration agreement also which is part of the instrument - 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 ' G summed up - Order of the High Court set aside and the ' matter remitted to the Chief Justice of the High Court to first decide the issue of stamp duty, and if the document is duly stamped, then appoint an arbitrator in accordance with law - H 382 SMS TEA ESTATES PVT. LTD. v. CHANDMARI TEA 383 CO. PVT. LTD. Registration Act, 1908 - s. 49, proviso - Stamp Act, 1899 - A ss. 33,35,38 and 40. The respondent, under a lease deed dated 21.12.2006, granted lease of its two tea estates with all appurtenances to the appellant for a term of 30 years. 8 Clause 35 of the said lease deed provided for settlement of disputes between the parties by arbitration. It was the case of the appellant that prior to the execution of the said lease deed, on 29.11.2006 the respondent had offered to sell the said two tea estates to the appellant C for a consideration of Rupees four crores and 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; the appellant invested huge sums of money for improving the tea estates in the expectation that it would D either be purchasing the said estates or have a lease for 30 years; the respondent, however, abruptly and illegally evicted the appellant from the tea estates and took over their management in January 2008; the appellant issued a notice dated 5.5.2008 calling upon the respondent to E refer the matter to arbitration under Clause 35 of the lease deed and, ultimately, filed an application for appointment . of arbitrator. The Chief Justice of the Guwahati High Court dismissed the application holding that the lease deed was compulsorily registrable u/s 17 of the F Registration Act and s. 106 of the Transfer of Property Act; and as the lease deed was not registered, no term therein 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 G arbitration agreement contained in Clause 35 could not be termed as a collateral transaction and, therefore, the proviso to s 49 of the Registration Act would not assist the appellant. H 384 SUPREME COURT REPORTS [2011] 9 S.C.R A In the instant appeal, the questions for consideration before the Court were: (i) "Whether an arbitration agreement contained in an unregistered (but compulsorily registrable) instrument is valid and enforceable?" (ii) "Whether an arbitration agreement in an B unregistered instrument which is not duly stamped, is valid and enforceable?" and (iii) "Whether there is an arbitration agreement between the appellant and respondent and whether an Arbitrator should be appointed?" c Allowing of the appeal, the Court HELD: 1. An arbitration agreement does not require registration under the Registration Act, 1908. Even if it is found as one of the clauses in a contract or ins
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