Arbitration clauses survive non-registration, but insufficient stamping prevents reliance until duty and penalty are paid.

An arbitration clause in an unregistered but compulsorily registrable instrument remains valid and enforceable because it is a separable collateral term for dispute resolution, even though the document cannot affect immovable property or be used to prove the underlying transaction. By contrast, an arbitration clause in an instrument that is not duly stamped cannot be acted upon until the stamping defect is cured by payment of duty and penalty, after which the clause may be considered. The stated consequence is that non-registration does not defeat arbitration, but insufficient stamping bars reliance on the clause until rectified.

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Issues: (i) Whether an arbitration agreement contained in an unregistered but compulsorily registrable instrument is valid and enforceable. (ii) Whether an arbitration agreement contained in an instrument that is not duly stamped is valid and enforceable.

Issue (i): Whether an arbitration agreement contained in an unregistered but compulsorily registrable instrument is valid and enforceable.

Analysis: An arbitration clause is a collateral term concerned only with resolution of disputes and is independent of the substantive obligations in the document. Under the law relating to registration, non-registration of a compulsorily registrable document prevents the document from affecting immovable property or being used as evidence of transactions affecting such property, but does not destroy a separable arbitration agreement contained in it. The arbitration agreement survives as an independent agreement for dispute resolution.

Conclusion: Yes. An arbitration agreement in an unregistered but compulsorily registrable instrument is valid and enforceable for the purpose of arbitration.

Issue (ii): Whether an arbitration agreement contained in an instrument that is not duly stamped is valid and enforceable.

Analysis: The stamp law operates differently from the registration law. An instrument chargeable with duty cannot be acted upon unless it is duly stamped, and the court must first examine whether the document is duly stamped and impound it if necessary. Until the deficit duty and penalty are paid and the defect is cured, the court cannot act upon the instrument, including the arbitration clause embedded in it. After the deficiency is rectified, the document may be treated as duly stamped and the arbitration clause can then be considered.

Conclusion: No. An arbitration agreement in an unstamped instrument cannot be acted upon until the stamping defect is cured.

Final Conclusion: The appeal succeeds, the High Court order is set aside, and the matter is sent back for first determination of stamp duty and thereafter for appointment of an arbitrator if the document is duly stamped.

Ratio Decidendi: An arbitration clause in a contract or conveyance is severable and can be enforced despite non-registration, but it cannot be acted upon where the underlying instrument is insufficiently stamped until the stamping defect is cured in accordance with the stamp law.

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