Criminal Trident Pack: IPC, CrPC and IEA by Sr. Adv. G.S Shukla and Adv. Raghav Arora
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Saini Ankita   08 July 2020

Business agreement on stamp paper having arbitrary clause.

hi,
there is a private limited companydeling in restaurant businesses, which had a agreement on non judicial stamp paper (non registered ) with it's one of client ,where the client agreed to invest in business for restaurant buildup (rs.13 lakh including 3.5 lakh franchise fees non refundable )and security deposit of 2 lakh total 15.5 lakhs and agreed to receive rs. 30k p.m or 10% of sales whichever is higher. the company paid the person for 9 months and unable to pay starting Jan'2020 but still trying hard due to this slowdown before Corona pandemic and now this world pandemic the business got ruined and due to no cash in the co.pany to operate business everything is got closed.
the agreement with the person though unregistered states that during any conflict in regards to the agreement it should be resolved through arbitration where the arbitrator will be appointed by the company's part in Kolkata.

the company has two directors and both are ruined due to bad market and doesn't have a penny as they are now doing petty jobs in the market for their own survival. but in this situation the client is trying to put a case through the court and constantly putting pressure.
just want to ask is there any way where the directors can plead mercy and come out of this as they really don't have a penny to pay and also what measure should they take for their benefit if the person tries to get them arrested .
also despite of arbitrary clause can the person go to court for the agreement.


Learning

 2 Replies

Adv Keches Shilwante (Partner @ Legal Biceps)     08 July 2020

In India it is important to note that even oral agreement are valid contracts. The Contract Act, 1872 does not make stamping of agreements compulsory, nor does it deem an unstamped agreement/contract invalid and unenforceable. The agreement does not require mandatory stamping.  The Contract/Agreement are enforceable against parties who signed the contract/agreement even they are not stamped.

But under Indian Registration Act, there are certain Agreement which need to be registered compulsorily. And in your case the value of transaction is more than Rs.100/- which required compulsory registration.

Accordingly section 35 of stamp act agreement/contract which does not bear a requisite stamp duty is inadmissible in court. But unstamped agreement can made admissible in court by paying the deficit stamp duty along with penalty.

So paid the requisite stamp duty and file a recovery suit in civil court. Besides you can also file criminal complaint for cheating, criminal breach of trust.

Please take the help of local lawyer for more advice.

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108)     08 July 2020

Originally posted by : Saini Ankita
hi,there is a private limited companydeling in restaurant businesses, which had a agreement on non judicial stamp paper (non registered ) with it's one of client ,where the client agreed to invest in business for restaurant buildup (rs.13 lakh including 3.5 lakh franchise fees non refundable )and security deposit of 2 lakh total 15.5 lakhs and agreed to receive rs. 30k p.m or 10% of sales whichever is higher. the company paid the person for 9 months and unable to pay starting Jan'2020 but still trying hard due to this slowdown before Corona pandemic and now this world pandemic the business got ruined and due to no cash in the co.pany to operate business everything is got closed.the agreement with the person though unregistered states that during any conflict in regards to the agreement it should be resolved through arbitration where the arbitrator will be appointed by the company's part in Kolkata. the company has two directors and both are ruined due to bad market and doesn't have a penny as they are now doing petty jobs in the market for their own survival. but in this situation the client is trying to put a case through the court and constantly putting pressure. just want to ask is there any way where the directors can plead mercy and come out of this as they really don't have a penny to pay and also what measure should they take for their benefit if the person tries to get them arrested .also despite of arbitrary clause can the person go to court for the agreement.

 

1.  Investing is not equal to Loan. IF Client has "invested" and not "loaned", THEN there is no scope of any Criminal or Civil case against the Restaurant owner, by the Investor-Client.  Further the "arbitrator" can arbitrate only on legally enforceable documents.

2. Civil Court has no jurisdiction to entertain non-Stamp Duty paid and Non-Registered Agreements (which will be treated as toilet paper) during times of legel litigations.

Keep Smiling .... Hemant Agarwal
VISIT: www.chshelpforum.com


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