The Madras High Court has upheld an arbitral award that enforced an unregistered family arrangement over a registered Will, ruling that the parties had voluntarily waived their rights under the Will. The Division Bench, comprising Dr. Justice G. Jayachandran and Justice Mummineni Sudheer Kumar, dismissed an appeal challenging the validity of the arbitration proceedings, reaffirming that an arbitration agreement within an unstamped or unregistered instrument remains enforceable in light of the Supreme Court’s decision in In Re Interplay.
The Court dismissed Original Side Appeal (O.S.A.) No. 206 of 2020, confirming the order of the Single Judge and the award passed by the Sole Arbitrator. The Bench held that the family arrangement, despite being unregistered, was binding as the parties had consciously waived their rights under the earlier registered Will. The Court further clarified that the dispute involved rights in personam (between the parties) rather than rights in rem, making it a valid subject for arbitration.
Background
The dispute arose within the family of the late A.X.L. Ignatius and his wife, Amirtham Ignatius. The couple had two sons, Suresh Jayakumar Ignatius (deceased) and Anto Dev Prakash, and one daughter, Jayachitra Sahaya Josephine.
Following the death of A.X.L. Ignatius in 2005 and his son Suresh in 2011, the family members entered into a Memorandum of Family Arrangement on January 4, 2012. Under this agreement:
- The immovable property in Tuticorin was to devolve upon the mother, Amirtham Ignatius.
- The property in Chennai was to be shared equally (1/3rd each) among the daughter, the surviving son, and the legal heirs of the deceased son.
- The parties specifically agreed to waive any rights conferred by any Will executed by A.X.L. Ignatius.
- The agreement contained a clause to settle disputes through arbitration.
However, the legal heirs of the deceased son (Appellants) and the second son later opposed the arrangement, claiming exclusive rights to the Chennai property based on a registered Will dated January 22, 1993, executed by A.X.L. Ignatius. They alleged that their signatures on the family arrangement were obtained through fraud and coercion while they were mourning, and that the existence of the Will was suppressed.
The dispute was referred to a Sole Arbitrator, Justice M. Vijayaraghavan (Retd.), who ruled in favor of the daughter (Claimant), holding the family arrangement valid and directing partition. The Single Judge of the High Court subsequently dismissed the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the award. The appellants then moved the Division Bench.
Arguments of the Parties
The Appellants (Vasanthi Suresh and others) contended that:
- Inadmissibility: The family arrangement was unregistered and unstamped, rendering it inadmissible in evidence.
- Compulsory Registration: The document effected a partition of immovable property and thus required compulsory registration under Section 17 of the Registration Act.
- Supremacy of Will: The registered Will of 1993 could not be superseded by a subsequent unregistered agreement.
- Rights In Rem: The dispute involved rights in immovable property, which are rights in rem, and thus not arbitrable.
The Respondents (Jayachitra Sahaya Josephine and others) argued that:
- Voluntary Execution: The family arrangement was the result of deliberations spread over two weeks, negating claims of coercion.
- Express Waiver: Clauses 9 and 10 of the agreement explicitly stated that the parties undertook to waive their rights under any Will and agreed to execute necessary deeds to formalize the transfer.
- Legal Precedent: Citing the Supreme Court’s decision in In Re Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Stamp Act, 1899, they argued that a defect in stamping or registration does not render the arbitration agreement void.
Court’s Analysis and Observations
The Division Bench rejected the appellants’ contentions, concurring with the findings of the Arbitral Tribunal and the Single Judge.
1. Validity of Waiver and Knowledge of Will The Court observed that the Tribunal had factually determined that the parties signed the family arrangement voluntarily, fully aware of the 1993 Will. The Bench noted:
“Only if cases where some of beneficiaries under the Will know about its existence and rest of the beneficiaries had no knowledge about the Will, agree to waive the right under the Will, the waiver is deemed to be obtained by fraud… Otherwise, the waiver by all parties concern, with valid consent, will always hold good.”
2. Registration and Admissibility Addressing the objection regarding the non-registration of the family arrangement, the Court referred to the Arbitrator’s finding that the document fell under Section 17(2)(v) of the Registration Act. The agreement merely created a right to obtain another document (such as release deeds) to declare right and title, rather than declaring the title itself in praesenti.
Furthermore, relying on the Constitution Bench judgment of the Supreme Court in (2024) 6 SCC 1 (In Re Interplay), the Court held that the “separability presumption” ensures the validity of an arbitration agreement even if the underlying contract is inadmissible. The Court quoted the Supreme Court:
“Non-stamping or insufficient stamping of an instrument does not render it invalid or non-existent… The validity of an arbitration agreement, in the face of the invalidity of the underlying contract, allows the Arbitral Tribunal to assume jurisdiction.”
3. Arbitrability of Rights In Rem vs. In Personam The Court dismissed the argument that the dispute concerned rights in rem and was therefore non-arbitrable. The Bench clarified that the decision pertained to an inter se dispute between the parties regarding their rights under the family arrangement.
“The decision is in respect of interse dispute between parties and only declaration of right in personum and not in rem. The award is not against any other third party, who may have better title or rights in the property to term it as a declaration of right in rem.”
Decision
The High Court dismissed O.S.A.No. 206 of 2020, confirming the order of the learned Single Judge and the award passed by the Arbitrator.
The Bench concluded:
“The parties having appended their signatures in the document to refer the dispute to the Arbitrator… the plea that the family arrangement is unenforceable and invalid for want of registration, have no legs to stand.”
The Court directed that the award be executed as per the law in force and made no order as to costs.
