SMS Tea Estates Pvt. Ltd. v Chandmari Tea Co. Pvt. Ltd.

• Chandmari Tea Co. granted SMS Tea Estates a 30-year lease of two tea estates by a deed dated 21 December 2006. Clause 35 provided for arbitration.
• The lease deed was not registered, although a lease of that length must be registered, and it was not duly stamped.
• After SMS Tea Estates was evicted in January 2008, it invoked clause 35 and applied under S.11 for appointment of an arbitrator.
• The Chief Justice of the Guwahati High Court dismissed the application on 28 May 2010, holding that no term of the unregistered lease, including clause 35, could be relied on.

1. Is an arbitration agreement in an unregistered but compulsorily registrable document valid and enforceable?
2. Is an arbitration agreement in a document that is not duly stamped valid and enforceable?
3. Should an arbitrator be appointed?

• Registration: an arbitration agreement does not need registration. A clause in an unregistered lease deed is a collateral transaction under the proviso to S.49 of the Registration Act and is separable from the lease under S.16(1)(a). The court can act on it, but the arbitrator cannot rely on the unregistered lease to enforce its terms.
• Stamping: if the document is not duly stamped, S.35 of the Stamp Act bars acting on it, including its arbitration clause. The court must impound it and follow Ss.33, 35 and 38. Once the deficit duty and penalty are paid, it can act on the clause.
• The appeal was allowed and the matter was sent back to the Chief Justice of the Guwahati High Court to decide stamp duty first and then appoint an arbitrator.

An arbitration clause is an independent agreement that survives the non-registration of the main document. Under this judgment, though, an unstamped instrument could not be acted upon at all until the stamp defect was cured, even for its arbitration clause. That stamping holding is no longer good law after In re Interplay (2023).