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IN THE HIGH COURT OF JUDICATURE AT MADRAS
SATHI KUMAR SUKUMARA KURUP, J.
M/s. AG Melco Techno Services Private Limited Formerly known as M/s.ETA Melco Techno Services Private Limited, Represented by its Director R. Kannan - Petitioner
Versus
Mr. A. Mohammad Abdul Aziz, S/o.T.M.K.A. Ahmed Meeran and Anr. – Respondents
Civil Revision Petition No. 1517 of 2020
Decided On : 26-03-2025
(A) Arbitration and Conciliation Act, 1996 - Section 8 - Indian Stamp Act, 1899 - Section 35 - Registration Act, 1908 - Section 17 - Suit for recovery of advance amount - The suit was dismissed on grounds of maintainability due to an arbitration clause in the lease agreement. The court held that the arbitration agreement, even if contained in an unregistered and unstamped document, is not void and can be examined by the arbitral tribunal. (Paras 6, 10, 15, 20)
(B) Legal enforceability of agreements - An unregistered and unstamped lease agreement is inadmissible in evidence under Section 35 of the Stamp Act but does not render the arbitration clause void. The court emphasized that objections regarding stamping should be determined by the arbitral tribunal, not the civil court. (Paras 10, 15, 20)
Facts of the case:
The plaintiff filed a suit for recovery of Rs.9,30,800/- after vacating a leased property. The defendants contended the suit was not maintainable due to an arbitration clause in the lease agreement. The trial court dismissed the suit, directing the parties to arbitration. (Paras 2-6)
Findings of Court:
The court confirmed the trial court's order, stating that the arbitration clause must be honored and that the issue of stamping is a matter for the arbitral tribunal. (Paras 15-20)
Issues: The main issue was whether the suit was maintainable given the arbitration clause in the lease agreement. (Para 12)
Ratio Decidendi: The court ruled that the arbitration agreement's validity is not negated by the lease agreement's lack of registration or stamping, and such issues should be resolved by the arbitral tribunal. (Paras 10, 15)
Result: Civil Revision Petition dismissed; order of the trial court confirmed.
ORDER :
(SATHI KUMAR SUKUMARA KURUP, J.)
This Civil Revision Petition is filed seeking to set aside the order dated 29.11.2019 passed by the learned XIII Assistant Judge, City Civil Court, Chennai in I.A. No. 5747 of 2018 in O.S. No. 5056 of 2017.
2. The Revision Petitioner is the Plaintiff, who has instituted the suit in O.S. No. 5056 of 2017 before the XIII Assistant Judge, City Civil Court, Chennai. The suit was filed for recovery of Rs.9,30,800/- together with interest at the rate of 18% per annum from the date of filing the plaint till realisation.
3. The Respondents are the owners of the flat bearing Door No.49, Old Door No.26, Mount Road, Saidapet measuring 3105 square feet. According to the Revision Petitioner-Plaintiff, a portion of the said property was given to the Revision Petitioner for lease on a monthly rent of Rs.1,84,000/- per month from 01.12.2015. At the time of being inducted as a tenant, the Revision Petitioner also paid Rs.14 lakhs towards advance. After taking possession of the premises, due to business re-structuring, the Plaintiff sent a letter dated 08.10.2016 expressing their intention to vacate the premises by 31.12.2016. However, the Respondents, by reply dated 19.12.2016 refused to permit the Revision Petitioner from vacating the property. Notwithstanding such refusal, the Revision Petitioner vacated the premises and handed over the key to the Respondents on 04.01.2017. When the Revision Petitioner sought for refund of the advance amount of Rs.9,30,800/- after adjusting the monthly rent for October, November and December 2016 apart from service tax and Tax Deducted at Source (TDS), the Respondents refused to pay. The Revision Petitioner therefore issued a notice dated 14.02.2017 calling upon the Respondents to pay Rs.9,30,800/-. On receipt of the notice, a reply dated 25.04.2017 was sent by the Respondents calling upon the Revision Petitioner to pay Rs.4,18,811/- as the Revision Petitioner had vacated the premises before the expiry of 36 months from the date of lease.
4. On notice, the Respondents filed the instant I.A. No. 5747 of 2018 in O.S. No. 5056 of 2017 mainly contending that the suit is not maintainable. The agreement dated 30.11.2015 entered into between the parties categorically states that in the event of any dispute, the parties shall approach an Arbitrator as per Section 8 of the Arbitration and Conciliation Act, 1996 . Instead of approaching an Arbitrator for resolution of the dispute, the Revision Petitioner has filed the instant suit and it is not maintainable. Accordingly, the Respondents prayed for dismissal of the suit.
5. A reply statement was filed by the Revision Petitioner contending that they are not liable to pay any amount to the Respondents, as claimed. It is also submitted that the lease agreement is unregistered and unstamped and therefore, the contents contained thereof will not bind the Revision Petitioner in any manner.
6. The learned XIII Assistant Judge, City Civil Court, by the order dated 29.11.2019, allowed the application filed by the Respondents herein by holding that the suit filed by the Revision Petitioner is not maintainable in view of the fact that in the lease agreement between the parties, there is a clause for referring the dispute, if any, to an Arbitrator. Therefore, the Revision Petitioner has to only approach the Arbitrator for resolution of the dispute and the suit as filed is not maintainable. Accordingly, the learned XIII Assistant Judge, City Civil Court, allowed the application filed under Section 8 of the Arbitration Act and dismissed the suit by referring the parties to the arbitration in accordance with the provisions of the lease agreement dated 30.11.2015.
7. The learned Senior Counsel for the Revision Petitioner-Plaintiff would vehemently contend that the lease agreement dated 30.11.2015 is legally not enforceable inasmuch as the lease agreement in an unstamped and unregistered instrument under the provisions of the Indian Stamp Act, 1899 and
An arbitration agreement in an unregistered and unstamped lease is not void; issues of stamping must be resolved by the arbitral tribunal, not the civil court.
Courts should minimize intervention in arbitration until awards are pronounced, only assessing arbitrability when objections about document validity arise under the Arbitration Act.
The Supreme Court clarified that unregistered arbitration agreements are not void and emphasized the Referral Court's limited role regarding the enforceability of such agreements.
Non-payment of stamp duty on the substantive contract does not invalidate the arbitration agreement.
An arbitration agreement within a lease deed remains enforceable even if the deed is unregistered, reflecting the separability doctrine.
(1) Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act – Such agreements are not rendered void or void ab initio or unenforcea....
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