Arbitration is a form of dispute resolution that is increasingly becoming popular in many legal circles. In arbitration, parties involved in a dispute agree to submit their case to an impartial third-party arbitrator who then makes a binding decision. Arbitration agreements are often included in contracts as a way of avoiding a lengthy and costly legal battle in court.

However, what happens when an arbitration agreement is included in an unregistered instrument? An unregistered instrument is a legal document that is not registered with the government. Examples of unregistered instruments include leases, agreements, and mortgages.

The Indian Arbitration and Conciliation Act of 1996 provides that an arbitration agreement can be enforced in an unregistered instrument. Section 7(1)(b) of the act states that an arbitration agreement in an unregistered instrument can be enforced if it is in writing and signed by the parties. The act defines an arbitration agreement as an agreement by parties to submit their disputes to arbitration.

In the case of McDowell & Co Ltd. v Jagdish Prasad Gupta and Sons, the Supreme Court of India held that an arbitration agreement in an unregistered instrument is valid and enforceable. The court reasoned that the purpose of the act is to promote arbitration as a means of alternate dispute resolution. Therefore, the act should be interpreted in a manner that promotes the object of the act.

However, it is important to note that the enforceability of an arbitration agreement in an unregistered instrument depends on the nature of the dispute. Section 2(3) of the act provides that the act applies only to disputes that are considered to be commercial in nature. Therefore, if the dispute is not commercial in nature, the arbitration agreement may not be enforceable.

In conclusion, an arbitration agreement in an unregistered instrument is valid and enforceable under Indian law. However, its enforceability depends on the nature of the dispute. As a professional, it is important to understand the legal implications of arbitration agreements in unregistered instruments to ensure that your content is accurate and informative.