Supreme Court of India
RAMESH KUMAR & ANR.versusFURU RAM & ANR. ETC.
- Citation
- 2011 INSC 593
- Decided
- 18 August 2011
- Disposal
- Appeal(s) allowed
- Bench
- R V RAVEENDRAN
Holding
The Supreme Court held that the suits were maintainable despite sections 32 and 33 of the Arbitration Act because they sought to set aside fraudulently obtained decrees, and that the collusive arbitration awards were unregistered and therefore void.
Summary
The appellants, brothers who co‑owned land, sued the respondents seeking a declaration that the arbitration awards and the subsequent court decrees granting title to the respondents were null and void because they were obtained through fraud and stamp‑duty evasion. The lower courts dismissed the suits on the ground that sections 32 and 33 of the Arbitration Act, 1940 barred any challenge to an award, holding that the suits only sought to set aside the arbitration agreement. The Supreme Court held that the suits were maintainable because they challenged the orders making the awards the rule of court, which were procured by a sham arbitration designed to avoid registration and stamp duty. It found that the arbitration agreements, awards and the court’s decrees were collusive, the awards were compulsorily registrable under the Registration Act, 1908 and, being unregistered, could not be enforced. Consequently, the Court set aside the judgments of the first appellate court and the High Court and restored the trial court’s decree declaring the awards and decrees void. The appeals were allowed.
Issues considered
- Whether the suits filed by the appellants are maintainable notwithstanding sections 32 and 33 of the Arbitration Act, 1940.
- Whether the arbitration awards and the subsequent decrees were obtained by fraud or misrepresentation.
- Whether the arbitration awards are compulsorily registrable under the Registration Act, 1908 and thus invalid if unregistered.
- Whether an order making a fraudulent arbitration award the rule of court is invalid.
Legislation cited
- Arbitration Act, 1940s. 14, s. 17, s. 32, s. 33
- Indian Contract Act, 1872s. 17
- Indian Evidence Act, 1872s. 114
- Registration Act, 1908s. 17, s. 49
Subjects
ArbitrationFraudCollusive awardRegistration ActStamp duty evasionCivil suitRule of courtEvidenceMisrepresentation
Judgment
[2011] 10 S.C.R. 453
RAMESH KUMAR & ANR. A
V.
FURU RAM & ANR. ETC.
(Civil Appeal Nos. 7085-7086 of 2011)
AUGUST 18, 2011
8
[R.V. RAVEENDRAN AND A.K. PATNAIK, JJ.]
SUIT:
Suits for declaration that the decrees obtained in suits C
filed ulss 14 and 17 of Arbitration Act were null and void as
they were vitiated by fraud - Decreed by trial court on the
ground that the arbitration awards were not registered - First
appellate court and High Court dismissed the suits holding
that the suits were filed only for declaring that the arbitration
agreements and awards were invalid and the suit for such 0
declaration were not maintainable in view of ss. 32 and 33 of
Arbitration Act - HELD: Challenge to the validity of the
arbitration agreement and the awards was incidental to
challenge to the order making the awards rule of the court and
the decrees drawn in pursuance of such orders - Therefore, E
ss. 32 and 33 were no bar to the suits - The decrees in suits
uls 14 and 17 of Arbitration Act were obtaining by committing
fraud upon the plaintiffs, the court and the State Government
evading liability to pay stamp duty and registration charges
- Judgment of first appellate court and High Court set aside F
and judgments and decrees of trial court decreeing the suits
restored.
ARBITRATION ACT, 1940:
ss. 14 and 17 - Reference agreements - Awards - G
Applications for making the awards rule of the court- HELD:
The entire procedure was fraudulent as (i) there was no dispute
between the parties, (ii) there was no reference of any dispute
to arbitration, (iii) the reference agreements were prepared
453 H
454 SUPREME COURT REPORTS [2011] 10 S.C.R.
A and executed in pursuance of a pre-existing arrangement to
have collusive awards and (iv) the arbitrator was not required
to decide any dispute between the parties nor was there any
adjudication of the dispute by the arbitrator - Reference to
arbitration was to avoid stamp duty and registration charges
B - Obtaining sham and collusive arbitration awards when there
was no dispute and then obtaining a nominal decree in terms
of the said awards would be a fraud committed upon the court
and the State Government by evading liability to pay the
stamp duty and registration charges - The irregularities,
c illegalities, suppressions and misrepresentations which
culminated in the orders making the awards the rule of the
court and directing that the awards be made decrees of the
court, show that the decrees in terms of the awards were
obtained by fraud - Stamp fraud - Registration Act, 1908 -
D s. 17 - Administration of justice - Fraud committed upon
court.
FRAUD - Connotation of - Explained.
REGISTRATION ACT, 1908:
E
ss. 17 and 49 - Compulsorily registrable documents -
Held: If the decree or order of the court is not rendered on
merits, but expressed to be made on a compromise and
comprises any immoveable property which was not the subject
mater of the suit or proceeding, such order or decree is
F compulsorily registrable - Further, clause (iv) of sub-s. (2) of
s. 17 excludes decrees or orders but does not exclude awards
of arbitrator- Any arbitration award which purports or operates
to create, declare any right, title or interest in any immovable
property of the value of more than Rs. 100 is compulsorily
G registrable - In the instant case, the awards are clearly
.documents which purport or operate to create and ·declare a
right, title or interest in an immoveable property of the value
of more than Rs. 100 which was not the subject matter of the
dispute or reference to arbitration - Therefore, the awards were
H compulsorily registrable, but as they were not registered they
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 455
ETC.
could not be acted upon u/s 49 of the Registration Act, 1908 A
nor could a decree be passed in terms of such unregistered
awards.
CONSTITUTION OF IND/A, 1950:
Article 136 - Scope of - Held: Normally Supreme Court B
would not interfere with a finding of fact relating to fraud and
misrepresentation - But, in the instant case, as material
evidence produced by the plaintiffs-appellants had been
ignored and as the courts below failed to draw proper
inferences therefrom and had ignored a cause of fraud, the C
Court is constrained to interfere with reference to a question
of fact - When the first appellate court and High Court held
that the decree was not null and void, the plaintiffs-appellants
were entitled to urge all grounds to show that the entire
transaction and arbitration proceedings were fraudulent and D
. the decree was also a result of fraud - In the instant case,
there is variance and divergence between the pleading and
documentary evidence, pleading and oral evidence and
between the oral and documentary evidence - It is well settled
that no amount of evidence contrary to the pleading can be E
relied on or accepted - It is thus clear that the entire case of
the respondents is liable to be rejected - The different
versions clearly demonstration fraud and misrepresentation
on the part of the respondents - Pleadings - Evidence.
F
ADVOCATE:
Acts of an advocate in arbitration proceedings and before
the court- An advocate engaged by respondents through their
counsel to make awards in their favour - He was appointed
as an arbitrator - On the following day, he made the awards G
and gave the same to respondents - He signed the written
statements of defendants (appellants) in the proceedings u/
ss 14 and 17 of Arbitration Act as their counsel - Though he
was the third defendant in the said two suits, he appeared as
the counsel for defendants 1 and 2 without !heir co~sent or . hl
456 SUPREME COURT REPORTS [2011] 10 S.C.R.
A knowledge - He made a statement before the court in the
proceedings ulss 14 and 17 of the Arbitration Act on behalf
of defendants 1 and 2 that they have no objection for decrees
being made - Held: The acts of the advocate are fraudulent.
8 The appellants filed two suits bearing C.S. No. 63 of
1997 and C.S. No. 64 of 1997 in the Court of the Civil
Judge, Junior Division, Kurukshetra against 'FR' and 'KR'
(the respondents in the instant appeals) seeking
declaration that the judgments and decrees dated
30.3.1992 in two suits bearing C. S. No. 366 of 1992 and
C C.S. No. 367 of 1992 ulss 14 and 17 of the Arbitration Act,
• 1940 were null and void. It was also claimed that the
agreements dated 12.3.1992 and the awards dated
13.3.1992 and the proceedings in the said suits before the
Court of Sr. Sub-Judge, Kurukshetra and the mutation
D proceedings pursuant to the said decrees were all null
and void. The case of the plaintiffs-appellants was that
they were brothers and co-owners of lands measuring 98
kanals and 19 marlas; that they entered into an
agreement to sell the said lands to the sons of two
E brothers, namely, 'FR' and 'KR' for a sum of Rs.
14,22,0001- and received Rs. 1,00,0001- as earnest money.
Since the respondents did not pay the money and failed
to get the sale completed by the stipulated date, it was
decided in a panchayat that the appellants would permit
F the respondents to cultivate their said lands for a period
of one and a half years without any rent in satisfaction
and discharge of the claim of refund of Rs. 1,00,0001-. The
respondents on the pretext of reducing the terms of the
settlement into writing took the plaintiffs to Kurukshetra
G and got some papers signed by them and, made them to
appear in court in that regard. Subsequently, during the
pendency of a pre-emption suit, the plaintiffs came to
know about the proceedings and the decrees drawn in
C.S. No. 36611992 and C.S. No. 36711992. The
H respondents-defendants in their written statements
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 457
ETC.
alleged that they were ready to get the sale deeds A
registered but the appellants evaded and, therefore, the
matter was referred to arbitration and the awards made
by the arbitrator and the decrees made in terms of the
awards were lawful and valid. The trial court decreed the
suits holding that the awards were compulsorily B
registrable and as the same were not registered under
the Registration Act, they were invalid and the
consequent judgments and decrees were also invalid.
However, the first appellate court and the High Court in
, secqnd appeal held in favour of the defendants- c
respondents holding that the suits for declaration were
not maintainable.
In the instant appeals filed by the plaintiffs, the
questions for consideration before the Court were: (i)
whether the suits by appellants were not maintainable; D
(ii) whether the courts below were justified in holding that
there was no fraud or misrepresentation on the part of
the respondents in obtaining the decrees in terms of the
awards dated 13.3.1992; (iii) whether the arbitration
awards dated 13.3.1992 were invalid for want of E
registration; and (iv) whether the orders dated 30.3.1992
directing that the said awards be made the rule of the
court were invalid.
Allowing the appeals, the Court F
HELD:
Question (i):
1.1 The appellants were seeking a declaration in C.S. G
Nos. 63 and 64 of 1997 that the proceedings before the
Court of Sr. Sub-Judge, Kurukshetra, in the two suits No.
366 and 367 of 1992 u/ss 14 and 17 of the Arbitration Act
1940 resulting in the orders dated 30.3.1992 and decrees
made purtiuant to the said orders dated 30.3.1992 were
H
458 SUPREME COURT REPORTS [2011] 10 S.C.R.
A null and void as they were vitiated by fraud and
misrepresentation and for the consequential relief of
setting aside the mutations based on such decrees and
possession of the lands. The challenge to the validity of
the agreements dated 12.3.1992 and awards dated
B 13.3.1992 was incidental to challenge the orders dated
30.3.1992 and the decrees drawn in pursuance of such
orders. [para 11) [473-F-H]
1.2 The first appellate court and the High Court have,
therefore, erroneously proceeded on the basis that the
C suits were filed only for declaring that the arbitration
agreements dated 12.3.1992 and awards dated 13.3.1992
were invalid and that the suits for such declaration were
not maintainable having regard to the bar contained in ss.
32 and 33 of the Arbitration Act. What has been lost sight
D of is the fact that the challenge was to the orders dated
30.3.1992 making the awards rule of the court. To
establish that the said judgments and decrees were
obtained by fraud and misrepresentation and, therefore,
invalid, it was also contended that the agreements dated
E 12.3.1992 and the awards dated 13.3.1992 and the
proceedings initiated u/ss 14 and 17 of the Arbitration Act
seeking decrees in terms of the awards were all
fraudulent. Therefore, ss. 32 and 33 of Arbitration Act
were not a bar to the suits (C.S. Nos. 63 and 64 of 1997)
F filed by the appellants. [para 11) [473-H; 474-A-D]
Question (ii):
2.1 The manner in which the agreements dated
12.3.1992 were entered, the awards dated 13.3.1992 were
G made and the said awards were made rule of the court,
clearly discloses a case of fraud. Ingredients of fraud are
an Intention to deceive, use of unfal.1" means, dellberate
concealment of material facts, or abuse ofl>C>sttton-of
confidence. 'Fraud' Is 'knowing misrepresentation of the
H truth or concealment of a material fact to Induce another
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 459
ETC.
concealment or false representation through a statement A
or conduct that injures another who relies on it in acting.
Any conduct involving deceit resulting in injury, loss or
damage to some one is fraud. [para 12] [474-E-G]
The Black's Law Dictionary and P.Ramnatha Aiyar's
Advanced Law Lexicon (3rd Edition, Book 2, Page 1914-
8
1915). - referred to.
2.2 Any wilful attempt to defeat or circumvent any tax
law in order to illegally reduce one's tax liability is a tax
evasion which is termed as a tax fraud. The stamp duty c
payable under Stamp Act is considered to be a species
of tax levied on certain transfer documents and
instruments. Any wilful attempt to defeat the provision of
the Stamp Act or illegally evade one's liability to pay
stamp duty will be a stamp evasion which would amount 0
to a fraud. [para 14] [476-D-E]
2.3 In the instant case, one of the plaintiffs was
examined as PW-1 and a member of the Panchayat was
examined as PW-2. The evidence of PW1 and PW2 is
consistent and narrate the events described in the plaints E
in the two suits showing the deceit and fraud practiced
upon the plaintiffs. The plaintiffs exhibited two
documents, that is, revenue extracts show-ing the
mutation in favour of the respondents and the decrees
made in pursuance of the orders dated 30.3.1992 by the F
Sr. Sub-Judge in CS Nos.366 and 367 of 1992. [para 15]
[475-F-G]
2.4 The defendants - respondents did not step into
the witness box to give their version, which leads to an G
adverse Inference that if the defendants had examined
themselves, their evidence would have been
unfavourable to them (s.114 of Evidence Act, 1872 read
'with Illustration (g)). They however examined five
witnesses : the arbitrator, as DW-1; their power of
iattorney holder as OW 2, their Advocate who appeared H
460 SUPREME COURT REPORTS [2011] 10 S.C.R.
A in C.S.No.366 and 367 of 1992, as DW-3; a member of the
panchayat as DW4; and, a court officer, as DW-5
examined in connection with the production of
documents from the court. The oral evidence of DW1 to
DW4 unfolds a story, different from what was pleaded by
B the respondents in their written statement. [para 16-17)
[475-H; 476-A-C, E]
2.5 The respondents' version of what transpired as
emerging from the evidence of OW1 to DW4 indicates the
C sale in terms of the agreement of sale dated 18.10.1991
did not take place, and it was agreed before the
panchayat that the respondents should pay a sum of
Rs.15,00,000 in addition to earnest money of Rs.1,00,000/
-, thereby increasing the price to Rs.16,00,000/- instead
of Rs.14,22,000/-; the respondents paid the entire balance
D of Rs.15,00,000/- in cash in a lump sum to the appellants
in the presence of the pan .. hayat; to avoid the heavy
expenditure towards stamp duty and registration charges
for the sale deed, it was agreed that arbitration awards
would be obtained in favour of respondents and the
E appellants would agree for decrees in terms of the
awards, so as to confer title upon the respondents,
instead of executing sale deeds; two agreements dated
12.3.1992 were entered into appointing DW-1, as
arbitrator; the said arbitrator recorded the statements of
F parties on 12.3.1992 and made awards dated 13.3.1992
declaring 'FR' to be the owner in possession of 49 Kanals
10 Marlas of land and 'KR' to be the owner of 49 Kanals
and 9 Marlas of land; thereafter, and by orders dated
30.3.1992 the court directed that decrees be drawn up in
G terms of the award. [par~ 22) [480-A-G]
2.6 However, the documentary evidence produced
by the defendants - respondents narrate a completely
different story: The reference agreements dated
12.3.1992, the statements recorded by the arbitrator on
H 12.3.1992 and the awards dated 13.3.1992, all stated that
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 461
ETC.
appellants had borrowed Rs.8 lacs from 'FR' and Rs.8 A
lacs from 'KR' in November 1991 and had agreed to repay
the same with interest at the rate of 2% per month that
as they were not able to repay the amounts borrowed
with interest, they agreed to give 49 kanals 10 marlas of
land to 'FR' and 49 kanals 9 marlas of land to 'KR' and B
delivered possession and confirmed the same before the
arbitrator. The identical plaints dated 13.3.1992 in the two
suits (CS Nos.366 and 367 of 1992) u/ss 14 and 17 of the
Arbitration Act, 1940 filed by 'FR' and 'KR' state about the
loan of Rs.8,00,000/- and making 'FR' and 'KR', owners c
of land in question. The written statements were also filed
on the same day the suits were filed, that is, 16.3.1992.
The written statements were not signed by either of the
appellants but were signed by Advocate (DW-1)
(defendant no.3 in tho.se suits) as advocate for the 0
defendants 1 and 2 (appellants). The brief written
statements stated that paras 1 to 7 of the plaint were
correct and admitted and that paras 8 and 9 were legal
and that, therefore, the suit be decreed. The order-sheets
dated 16.3.1992 in the said two suits, recorded that the E
appellants (defendants 1 and 2 in the suits) appeared and
stated that they had no objection to decrees being made
in terms of the award. The appellants signed the order-
sheets and were identtfied by the arbitrator as their
counsel. The cases (C.S.Nos.366 and 367 of 1992)
thereafter came up before the Sr. Sub-Judge on 30.3.1992. F
The parties were not present. The orders of the court
dated 30.3.1992 in both suits were identical, and the
awards dated 13.3.1992 were made rule of the court. All
this lends credence to the case of the appellants that the
respondents had conspired with DW1 and DW3 and got G
certain documents prepared and persuaded appellants
who were barely literate, to give their consent on
16.3.1992 by misrepresenting to them that they were
giving consent for giving their lands for cultivation to
respondents for a period of one and half years as per th~ H
462 SUPREME COURT REPORTS [2011] 10 S.C.R.
A settlement. The trial court ignored relevant evidence and
drew a wrong inference that there was no fraud or
misrepresentation. [paras 23-27 and 29] [480-H; 481-A-D;
482-G-H; 483-A-C; 485-E·G]
2.7 Thus, there are different versions in the pleadings
8
and evidence led by the respondents. The case set forth
in the written statements of defendants-respondents was
completely different from the case made out in the
evidence of their witnesses DW1, DW2, DW3 and DW4.
C More interestingly, the case set forth in the written
statements and the case made out in the oral evidence
were completely different from what is stated in the
documentary evidence. [para 28] [483-E-F]
2.8 It is well settled that no amount of evidence
D contrary to the pleading can be relied on or accepted. In
the instant case, there is variance and divergence
between the pleading and documentary evidence,
pleading and oral evidence and between the oral and
documentary evidence. It is thus clear that the entire case
E of the respondents is liable to be rejected. The di_fferent
versions clearly demonstrate fraud and misrepresentation
on the part of the respondents. [para 28] [484-H; 485-A-
B]
2.9 The fraudulent manner in which the orders were
F obtained from the Sr. Sub-Judge, Kurukshetra for making
decrees in terms of the awards is evident from the
proceedings in the case. [para 30] [485-G-H]
2.10 DW-1 was an advocate engaged by respondents
G through their counsel DW-3, to make awards in their
favour. On 12.3.1992, he is appointed as arbitrator. On
13.3.1992, he makes the awards and gives them to
respondents. On 16.3.1992, he signs the written
statements of defendants (appellants) in the proceedings
H u/ss 14 and 17 of Arbitration Act, 1940 as their counsel.
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 463
ETC.
Though he is the third defendant in the said two suits A
(C.S. Nos.366 and 367 of 1992), he appears .as the
counsel for defendants 1 and 2 without their consent or
knowledge. On 30.3.1992, he makes a statement on behalf
of defendants 1 and 2 that they have no objection for
decrees being made. His acts are fraudulent. [para 31) B
[487-H; 488-A-C] .
2.11 There is also the stamp fraud committed by the
respondents. According to DW-1 to DW-4 under the
agreement of sale dated 18.10.1991, the sale price agreed
was Rs.14,22,000/-; that in the presence of a panchayat, C
there was a settlement and the price was increased to
Rs.16,00,000 for 98 kanals 19 marlas of land; the
respondents wanted to avoid payment of stamp duty and
registration charges on the sale deeds. They were advised
by their lawyer that they could get decrees from a civil D
court in terms of an arbitration award so that sale deeds
need not be executed and stamp duty and registration
charges need not be paid. It was decided by the
respondents on the advice of their lawyer to get arbitration
awards declaring them as owners and also get court E
decrees in terms of the awards. Thus, the agreements,
arbitration awards and decrees were sham and nominal,
the object of respondents being to evade the stamp duty
and registration charges payable with respect to a sale
deed, by obtaining decrees from the court in terms of the F
awards which declared their title. [para 33) [488-H; 489-
A-E)
2.12 The case shows another facet of such stamp
fraud. There can be a reference to arbitration only if there
is a dispute and there is an agreement to settle the G
dispute by arbitration. If the parties had already settled
the disputes before a panchayat for sale of half of the
property to 'FR' and another half to 'KR' for a
consideration of Rs.8,00,000 plus Rs.8,00,000/-, and
appellant had received the entire consideration, and H
464 SUPREME COURT REPORTS [2011) 10 S.C.R.
A delivered possession, there was no dispute between the
parties that could be referred to arbitration. The
respondents, on the advice of their advocate DW·3
decided to have nominal and sham arbitration
proceedings and awards by DW-1 and get decrees made
B in terms of the awards, only to avoid stamp duty and
registration charges. The entire procedure was
fraudulent because (i) there was no dispute between the
parties; (ii) there was no reference of any dispute to
arbitration; (iii) the reference agreements dated 12.3.1992
c were prepared and executed in pursuance of a pre-
existing arrangement to have a collusive awards; (iv) the
arbitrator was not required to decide any dispute
between the parties, nor was there any adjudication of the
dispute by the arbitrator. The references to arbitration,
the proceedings before the arbitrator, the awards of the
0
arbitrator, and the proceedings in court to get decrees in
terms of the awards, and the decrees in terms of the
award were all, thus, sham and bogus, the sole
fraudulent object being to avoid payment of stamp duty
and registration charges. [para 34] [489-F-H; 490-A-B·E·
E F]
2.13 The modus operandi adopted by the
respondents to obtain title to lands without a conveyance
and without incurring the stamp duty and registration
F charges due in respect of a conveyance by obtaining
sham and collusive arbitration awards when there was
no dispute, and then obtaining a nominal decree in terms
of the said awards would be a fraud committed upon the
court and the state government by evading liability to pay
G the stamp duty and registration charges. The
irregularities, illegalities, suppressions and
misrepresentations which culminated in the orders dated
30.3.1992 in CS NOs.366 and 367 of 1992 directing that
the awards dated 13.3.1992 be made decrees of the court,
H show that the decrees in terms of the awards were
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 465
ETC.
obtained fraudulently. [para 35] [490-G-H; 491-A-B] A
2.14 Normally, this Court would not interfere with a
finding of fact relating to fraud and misrepresentation.
But as material evidence produced by the defendants -
respondents had been ignored and as the courts below . 8
failed to draw proper inferences therefrom and had
ignored a cause of fraud, this Court is constrained to
interfere with 'reference to a question of fact. The suits
were decreed by the trial court on the ground that the
decrees were null and void and all the reliefs sought were C
granted. When the decrees dated 30.3.1992 were held to
be null and void, the question of plaintiffs challenging
any other finding in the judgment did not arise. Therefore,
when the first appellate court and High Court held that
the decree was not null and void, the plaintiffs-appellants
were entitled to urge all grounds to show that the entire D
transaction and arbitration proceedings were fraudulent
and the decree was also _a result of fraud. [para 36] [491-
B-E]
Question (iii): E
3.1 Chapter Ill of Registration Act, 1908 relates to
registrable documents. Section 17 enumerates the
documents which are compulsorily registrable and the
exceptions to the categories of documents. If the decree F
or order of the court is not rendered on merits, but
expressed to be made on a compromise and comprises
any immoveable property which was not the subject
mater of the suit or proceeding, such order or decree is
compulsorily registrable. Further, as clause (iv) of sub-s.
(2) of s.17 excludes decrees or orders of court, but does G
not exclude awards of arbitrator, any arbitration award
which purports or operates to create, declare any right,
title or interest in any immoveable property of the value
of more than Rs.100 is compulsorily registrable. [paras
37-38] [491-F; 492-G-H; 493-A-B] H
466 SUPREME COURT REPORTS [2011) 10 S.C.R.
A 3.2 In the instant case, the reference agreements
dated 12.3.1992 were not in regard to any agreement of
sale or any dispute relating to immoveable property, or
in regard to the lands in regard to which the award was
made. It did not refer to the lands In question. No dispute
B regarding immoveable property was referred to
'arbitration or was the subject matter of the arbitration.
The alleged subject matter· of arbitration was non-
payment of Rs.8,00,000 said to have been borrowed by
each of the appellants. The arbitrator recorded an alleged
c statement by the borrowers (appellants) that they had
received Rs.8,00,000 from 'FR' and Rs.8,00,000/- from
'KR'; that they were not able to refund the same and,
therefore, they had given lands measuring 49 Kanals ·10
Marlas to 'FR' and another 49 Kanals 9 Marlas to 'KR'; and
0 that 'FR' and 'KR' confirmed that they had obtained
possession of the said land. The awards, therefore,
declared that 'FR' and 'KR' had become the absolute
owners of the lands in question. Thus, the awards are
clearly documents which purport or operate to create
E and declare a right, title or interest in an immoveable
property of the value of more than Rs.100 which was not
the subject of the dispute or reference to arbitration.
Therefore, the awards were compulsorily registrable. If
they were not registered, they could not be acted upon
u/s 49 of the Registration Act, 1908 nor could a decree
F be passed in terms of such unregistered awards.
Unregistered awards which are compulsorily registrable
u/s 17(1)(b) could neither be admitted in evidence nor
could decrees be passed in terms of the same. The courts
below have not considered or decided this aspect at all.
G [para 39-40) [493-B-G; 495-A]
Ratan Lal Sharma vs. Purshottam Harit 1974
(3) SCR 109 =AIR 1974 SC 1066; and Lachhman Dass vs.
Ram Lal - 1989 (2) SCR 250=1989 (3) SCC 99 - relied on. •
H
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 467
ETC.
Question (iv) A
..
4.1 If an award was not genuine, but was collusive
and sham, the court will not and in fact can not make it a
rule of the court. There should be a dispute, there should
be an agreement to refer the dispute to arbitration, there 8
should be reference to arbitration, there should be an
adjudication or decision by the arbitrator after hearing
parties, for a valid arbitration. If the parties had already
settled their disputes and the arbitration award was only
a ruse to avoid payment of stamp duty and registration C
with respect to a sale deed and declare a title in persons
who did not have title earlier, then the entire proceedings
is sham and bogus. In fact, DW-1 was not really an
arbitrator, nor the proceedings before him were
arbitration proceedings and the awards were not really
arbitration awards. If all these facts which have a bearing D
on the making of the award and the validity of the award
are suppressed before the court and the court was misled
info making decrees in terms of the awards, necessarily
the proceedings are fraudulent and amounted to
committing fraud on the court. In these circumstances the E
decrees in CS Nos.366·and 367 of 1992 on the file of the
Sr. Sub.Judge, Kurukshetra were invalid. [para 41] [495-
8-F] .
4.2 The judgments of the first appellate court and F
High Court are set aside and the decrees of the trial court
decreeing the suits filed by the appellants restored. [para
42] [495-G]
Case Law Reference:
G
1974 (3) SCR 109 relied on para 40
1989 (2) SCR 250 relied on para 40
CIVIL APPELLATE JURISDICT.ION : Civil Appeal No.
7085-7086 of 2011. H
•
468 SUPREME COURT REPORTS [2011) 10 S.C.R.
A From the Judgment & Order dated 11.08.2009 of the High
Court of Punjab & Haryana at Chandigarh in R.S.A. Nos. 3229
& 3230 of 2004.
Abhay Kumar, Ashutosh Pande, Tenzing Tsering for the
Appellants.
8
Ajay Pal, Prashant Shukla, Abhinav Ramkrishna for the
Respondents.
The Judgment of the Court was delivered by
c R.V. RAVEENDRAN, J. 1. Leave granted. For
convenience parties will also be referred by their ranks in the
suit or by name.
2. The appellants - two brothers, are the co-owners with
D equal shares, in lands measuring in all 98 Kanals and 19
marlas situated in village Udana, Tehsil lndri, District Kamal.
They entered into an agreement to sell the said lands to the
sons of Furu Ram and Kalu Ram (b:others) the respective first
respondent in these two appeals, on 18.10.1991 for a
E consideration of Rs.14,22,000/- and received Rs.1,00,000 as
earnest money. As per the terms of the agreement, the balance
was to be paid by the purchasers at the time of registration of
the sale deed and the sale was to be completed by 31.1.1992.
F The case of appellants (Ramesh Kumar & Naresh Kumar)
3. The respondents were not in a position to pay the
balance of the sale consideration and therefore failed to get
the sale completed by 31.1.1992. The respondents requested
for refund of the earnest money of Rs.100,000/-. The appellants
G were not willing to return the earnest money in view of the
breach by the respondents. There was a panchayat in that
behalf wherein it was decided that the appellants should permit
the respondents to cultivate their said lands fo( a period of one
and half years without any rent in satisfaction and discharge of
H •
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 469
ETC. [R.V. RAVEENDRAN, J.]
the claim for refund of Rs.100,000/-. In pursuance of the said A
panchayat settlement, appellants delivered possession of the
suit lands to the respondents. The respondents represented that
they would reduce the terms of the said settlement into writing
and requested the appellants to come to Kurukshetra to sign
some papers. The appellants trusted the respondents as it was B
a panchayat settlement and went to Kurukshetra, and signed
the papers given by the respondents, under the bonafide belief
that they were signing papers relating to the terms of the
aforesaid settlement. The respondents also asked the
appellants to appear in court and confirm the same. The c
appellants accordingly went to the court and nodded their
assent when asked whether they were agreeable for the
settlement.
4. Some months thereafter, a suit was filed against
appellants in June 1992 by one Lal Singh and others claiming D
pre-emption. During the pendency of that suit, the appellants
learnt that the respondents had obtained a mutation in their
• favour on the basis of some decrees obtained by them from
the court of Senior Sub-Judge, Kurukshetra. On verification, the
appellants were surprised to learn that consent orders had been E
passed by the court of Sr. Sub-Judge, Kurukshetra on
30.3.1992 in C.S.No.366/1992 and C.S.No.367/1992, directing
decrees be drawn in terms of arbitration awards dated
13.3.1992 made by one Chandra Bhushan Sharma, Advocate,
Kurukshetra, appointed as per reference agreements dated F
12.3.1992.
5. According to appellants, the agreements dated
12.3.1992, the arbitration awards dated 13.3.1992, the consent
decrees dated 30.3.1992 and the mutations .in favour of G
respondents were all illegal, null and void and non-est, being
the result of fraud and misrepresentation on the part of
respondents. According to appellants, the allegations in the
· said agreerpents, awards and as also the plaints in CS
Nos.366 and 367 of 1992 that appellants had borrowed Rs.8 H
470 SUPREME COURT REPORTS (2011] 10 S.C.R.
A lacs from Furu Ram and Rs.B lacs from Kalu Ram agreeing to
repay the same with interest at 2% per month, that they had
given their lands to Furu Ram and Kalu Ram as they were riot
able to repay the two loans of Rs.800,000/- each, were all false.
· They alleged that they had not engaged any counsel for
B appearance in CS Nos.366 and 367 of 1992, nor signed any
written statements, nor participated in any arbitration
proceedings, nor made any statements agreeing for making
decrees in terms of any award. The appellants claimed that they
only signed some papers which respondents had represented
c to be documents relating_ to giving their lands on licence basis
for one and half years instead of returning the earnest money
deposit of Rupees One Lakh. The appellants therefore filed two
suits on 11.11.1993 (renumbered as CS No.63 and 64 of 1997)
in the court of the Civil Judge, Junior Division, Kurukshetra,
against Furu Ram and Kalu Ram respectively for a declaration
0
that the judgments and decrees dated 30.3.1992 in
C.S.No.366/1992 and 367/1992 (by which the awards dated
13.3.1992 were made the rule of the court), the agreements
dated 12.3.1992, the awards dated 13.3.1992, the proceedings
in C.S.No.366/1992 and 367/1992 and the mutations in
E pursuance of the said decrees were all null and void, non-est
and not binding on them and for the consequential relief of
possession of the suit properties. In the said suits (CS No.63
of 1997 and 64 of 1997) the arbitrator 'C.B. Sharma' was
impleaded as the second defendant.
F
The case of respondent (Furu Ram and Kalu Ram)
6. In their respective written statements in the two suits,
Furu Ram and Kalu Ram alleged that they were ready to get
G the sale deeds registered on the date fixed for sale as per the
agreement of sale dated 18.10.1991, but the appellants
evaded, and therefore the matter was referred to Arbitrator C
B Sharma by both parties for settlement. It was further alleged
· that the Arbitrator recorded the statements of appellants as well
H as respondents and made the awards. They contended that the
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 471
ETC. [R.V. RAVEENDRAN, J.]
awards made by the arbitrator and the decrees made in terms A
of the awards were lawful and valid.
The Proceedings
7. In.the two suits filed by appellants (C.S.Nos.63 and 64 ·
8
of 1997) the trial court framed appropriate issues as to whether
judgments and decrees dated 30.3.1992 were null and void;
whether plaintiffs were entitled to possession: whether the suits
were not maintainable; whether the suits were not within time:
and whether plaintiffs were estopped from ti.ling the suits, by
their own conduct; and whether the suits were bad for C
misjoinder/non-joinder of parties. Parties led oral and
documentary evidence in support of their cases.
8. The trial court decreed the two suits of appellants by
common judgment dated 7.2.1998. The trial court held that as o
the awards dated 13.3.1992 created a right in immovable
properties in favour of the respondents who did not have any
pre-existing right therein, they were compulsorily registrable;
and as the arbitration awards were not registered under the
Registration Act, 1908, they were invalid and.consequently the E
judgments and decrees dated 30.3.1992 of the court, making
decrees in terms of the said awards were also invalid. In view
of the said finding the trial co~rt declared that the decrees dated
30.3.1992, the agreements dated 12.3.1992, the awards dated
13.3.1992 and the mutations were illegal, null and void, not F
binding on the plaintiffs and granted the relief of possession.
In the course of the said judgment, the trial court however held
that the evidence of the advocate Sudhir Sharma (DW-3) and
the arbitrator C.B. Sharma (DW-1) showed that the appellants
had full knowledge of the facts and circumstances of the two G
cases (CS Nos.366 and 367 of 1992) and only thereafter they
filed written statements admitting the claims: .and that therefore
the case of the appellants that the consent decrees dated
30.3.1992 were obtained by fraud and misrepresentation could
not be accepted.
H
4 72 SUPREME COURT REPORTS [2011] 10 S.C.R.
A 9. The respondents filed appeals against the said common
judgment and decrees dated 7.2.1998 of the trial court. The
said appeals, filed on 19.3.1998, renumbered as C.A. No.37/
2003 and 38/2003, were allowed by the first appellate court
(Addi. District Judge, Kurukshetra) by judgment dated 3.8.2004
s and the common judgment and decrees of the trial court in the
two suits were set aside and the suits filed by the appellants
were dismissed with costs. The first appellate court held that
the consent decrees in terms of the awards could not be
challenged on the ground that they were not registered; that
c having regard to section 32 of the Arbitration Act, 1940, no suit
would lie on any ground whatsoever, for a decision upon the
existence, effect or validity of an award, nor could any award
be enforced, set aside, modified or in any way affected,
otherwise than as provided under the said Act; that an award
could be challenged or contested only by an application under
0
section :}3 of the Act, and an award could be set aside only on
any of the grounds mentioned in section 30 of the said Act. The
first appellate court further held that as no application was filed
under sections 30 and 33 of the said Act by appellants for
setting aside the awards and as the awards had been made
E rule of the court, the suits for declaration filed by the appellants
were barred by section 32 of the Arbitration Act, 1940, and
were not maintainable. The second appeals filed by the
appellants against the said common judgment of the first
appellate court were dismissed by the High Court by judgment
F dated 11.8.2009 holding that decrees passed by a court in
terms of the arbitration awards under section 17 of the
Arbitration Act, 1940, did not require registration and that
arbitration awards could be challenged only by applications
under section 33 of the said Act.
G
. Questions for consideration
10. The said common judgment of the High Court is
challenged in these appeals by special leave. On the
contentions urged, the questions that arise for our consideration
H are as under:
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 473
ETC. [R.V. RAVEENDRAN, J.]
(i) Whether the suits by appellants were not A
maintainable?
(ii) Whether the courts below were justified in holding
that there was no fraud or misrepresentation on the
part of the respondents in obtaining the decrees in 8
terms of the awards dated 13.3.1992?
(iii) Whether the arbitration awards dated 13.3.1992
were invalid for want of registration?
(iv) Whether the orders dated 30.3.1992 directing that C
the said awards be made the rule of the court,
invalid?
Re: Question (i)
11. The appellants sought a declaration that the orders D
dated 30.3.1992 passed by the Senior Sub-Judge,
Kurukshetra in C.S.No.366 and 367 of 1992 (directing that
decrees be drawn in terms of the awards dated 13.3.1992) and
the decrees drawn in terms of the awards as also the
agreements dated 12.3.1992 and the awards dated 13.3.1992 E
which led to such decrees, were null and void, as they were the
result of fraud and misrepresentation; and that the mutations
obtained on the basis of the said decrees were also null and
void. In other words, the appellants were seeking a declaration
that the proceedings before the court of Sr. Sub-Judge, F
Kurukshetra, in the two suits under sections 14 and 17 of the
Arbitration Act 1940 resulting in the orders dated 30.3.1992
and decrees made pursuant to the said orders dated 30.3.1992
were null and void as they were vitiated by fraud and
misrepresentation and for the consequential relief of setting G
aside the mutations based on such decree.s and possession
of the lands. The challenge to the validity Gf the agreements
dated 12.3.1992 and awards dated 13.3.1992 was incidental
to challenge the orders dated 30.3.1992 and the decrees
drawn in pursuance of such orders. The first appellate court and
H
474 SUPREME COURT REPORTS [2011] 10 S.C.R.
A the High Court have therefore erroneously proceeded on the
basis that the suits were filed only for declaring that the
arbitration agreements dated 12.3.1992 and awards dated
13.3.1992 were invalid and that suits for such declaration were
not maintainable having regard to the bar contained in sections
B 32 and 33 of the Arbitration Act, 1940. What has been lost sight
of is the fact that the challenge was to the orders dated
30.3.1992 making the awards rule of the court. To establish that
the said judgments and decrees were obtained by fraud and
misrepresentation and therefore invalid, it was also contended
c that the agreements dated 12.3.1992 and the awards dated
13.3.1992 and the proceedings initiated under sections 14 and
17 of the Arbitration Act, 1940 seeking decrees in terms of the
awards were all fraudulent. Therefore, sections 32 and 33 of
Arbitration Act, 1940 were not a bar to the suits (C.S.Nos. 63
and 64 of 1997) filed by the appellants.
0
Re : Question (ii)
12. The manner in which the agreements dated 12.3.1992
were entered, the awards dated 13.3.1992 were made and the
E said awards were made rule of the court, clearly disclose a
case of fraud. Fraud can be of different forms and different
hues. It is difficult to define it with precision, as the shape of
each fraud depends upon the fertile imagination and cleverness
who conceives of and perpetrates the fraud. Its ingredients are
F an intention to deceive, use of unfair means, deliberate
concealment of material facts, or abuse of position of
confidence. 'Fraud' is 'knowing misrepresentation of the truth
or concealment of a material fact to induce another to act to
his detriment'. 'Fraud' is also defined as a concealment or false
G representation through a statement or conduct that injures
another who relies on it in acting. (vide The Black's Law
Dictionary). Any conduct involving deceit resulting in injury, loss
or damage to some one is fraud.
13. Section 17 of the Indian Contract Act, 1872 defines
H 'fraud' thus :
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 4 75
ETC. [R.V. RAVEENDRAN, J.]
"17. 'Fraud' defined.-'Fraud' means and includes any of A
the following acts committed by a party to a contract, or
with his connivance, or by his agent, with intent to deceive
another party thereto or his agent, or to induce him to enter
into the contract :
B
(1) the suggestion, as a fact, of that which is not true,
by one who dqes not believe it to be true;
(2) the active concealment of a fact by one having
knowledge or belief of the fact;
c
(3) a promise made without any intention of performing
it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially D
declares to be fraudulent.
Explanation.- Mere silence as to facts likely to affect the
willingness of a person to enter into a contract is not fraud,
unless the circumstances of the case are such that, regard
being had to them, it is the duty of the person keeping E
silence to speak, or unless his silence, is in itself,
equivalent to speech."
The word 'fraud' is used in section 12 of Hindu Marriage Act,
1955 in a narrower sense. The said section provides that a F
marriage shall be voidable and annulled by a decree of nullity
if the consent of the petitioner was obtained by 'fraud' as to the
nature of the ceremony or as to any material fact or
circumstance concerning the respondent. In the context in which
it is used refers to misrepresentation, false statement, G
deception, concealment. •
14. Differently nuanced contextual meanings of the word
'fraud' are collected in P.Ramnath~ Aiyar's Advanced Law
Lexicon (3rd Edition, Book 2, Page 1914-1915). We may
extract two of them : H
476 SUPREME COURT REPORTS [2011) 10 S.C.R.
A "Fraud, is deceit in grants and conveyances of lands, and ·
bargains and sales of goods, etc., to the damage of
another person which may be either by suppression of the
truth, or suggestion of a falsehood. (Tomlin)
The colour of fraud in public law or administrative law, as
B
it is developing, is assuming different shade. It arises from
a deception committed by disclosure of incorrect facts
knowingly and deliberately to invoke exercise of power and
procure an order from an authority or tribunal. It must result
in exercise of jurisdiction which otherwise would not have
c been exercised. That is misrepresentation must be in
relation to the conditions provided in a section on existence
or non-existence of which power can be exercised."
Any wilful attempt to defeat or circumvent any tax law in order
D to illegally reduce one's tax liability is a tax evasion which is
termed as a tax fraud. The stamp duty payable under Stamp
Act is considered to be a species of tax levied on certain
transfer documents and instruments. Any wilful attempt to defeat
the provision of the Stamp Act or illegally evade one's liability
E to pay stamp duty will be a stamp evasion which would amount
to a fraud.
15. One of the plaintiffs (Naresh Kumar) was examined as
PW-1 and Raj Kumar, a member of the Panchayat was
examined as PW-2. The evidence of PW1 (Naresh Kumar) and
F PW2 (Raj Kumar) is consistent and narrate the events
described in the plaints in the two suits showing the deceit and
fraud practiced upon the appellants. The plaintiffs exhibited two
documents that is revenue extracts showing the mutation in
favour of the respondents and the decrees made in pursuance
G of the orders dated 30.3.1992 by the Sr. Sub-Judge in CS
Nos.366 and 367 of 1992.
16. The defendants - respondents did not step into the
witness box to give their version, which leads to an adverse
H inference that if the defendants had examined themselves, their
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 477
ETC. [R.V. RAVEENDRAN, J.]
evidence would have been unfavourable to them (vide section A
114 of Evidence Act, 1872 read with illustration (g) thereto).
They however examined five witnesses : C.B. Sharma, the
arbitrator, was examined as DW-1; Ram Kumar, their power
of attorney holder was examined as OW 2; Sudhir Sharma,
their Advocate who appeared in C.S.No.366 and 367of1992,- B
was examined as DW-3; Chander Pal, said to be a member
of the panchayat was examined as DW4; and Devi Dayal, a
court officer, was examined as DW-5 in connection with the
production of documents from the court. They also got exhibited
among other documents, the agreement of sale dated c
18.10.1991, the reference agreements dated 12.3.1992
appointing C. B. Sharma as arbitrator, the statements of parties
allegedly recorded by the Arbitrator on 12.3.1992, the awards
dated 13.3.1992 made by the Arbitrator, the plaints, written-
statements and order-sheets all dated 16.3.1992 and the final
0
order dated 30.3.1992 in CS Nos.366 and 367 of 1992, the
decrees in terms of the awards and the declarations made by
appellants on 31.3.1992.
17. The oral evidence of defendants' witnesses (DW1 to
DW4) unfolds a story, different from what was pleaded by them E
in their written statement. We may refer to the said evidence
briefly.
18. C. B. Sharma who was examined as DW-1 stated that
the parties gave him the agreements dated 12.3.1992
F
appointing him as arbitrator, that as arbitrator he recorded the
statements of the appellants and the respondents and on that
basis, made the awards dated 13.3.1992. He states that
appellants appeared before the court and consented to the
award as per proceedings Ex.04 dated 16.3.1992 and he
identified them as their counsel before the court. On further G
questioning, he admitted that he was not aware about the
transaction of sale and purchase between the parties or
whether there was any dispute at all in regard to sale or
:;>urchase of land. He stated that the parties submitted an
arbitration agreement in regard to a loan and that he gave the H
4 78 SUPREME COURT REPORTS [2011] 10 S.C.R.
A awards in regard to the loan; and thatthe reference agreements
dated 12.3.1992 were not in regard to any dispute relating to
property nor about the sale or purchase thereof nor about
specific performance of any agreement of sale and that the
dispute was only in regard to money and he was not
B appointed as arbitrator to settle any dispute in regard to any
land. He also stated that he did not charge any fee in regard
to the arbitration or making the awards. ·
19. DW2 - Ram Kumar, (son of Furu Ram), power of
c attorney holder of defendants, stated that the agreement of sale
in regard to 98 kanals 19 marlas was got executed for a
consideration of Rs.14 lakhs in favour of three sons of Furu
Ram (Ram Swaroop, Veer Singh and Ram Kumar) and four
sons of Kalu Ram (Bhagat Ram, Jagir Singh, Ramesh Kumar
and Lala Ram); that Rs.One lakh was given as earnest money
0
under agreement dated 18.10.1991; that there was a dispute
in regard to the price and the dispute was decided by a
panchayat consisting of Chander Pal, Purushottam, Harbhajan,
C. B. Sharma (Advocate) and Sudhir Sharma (Advocate) and
Rs.15 lakhs was paid in cash in their presence to the appellants;
E that after paying the money it was decided that a court decree
should be obtained in favour of the respondents and C.B.
Sharma was then appointed as the arbitrator to obtain a
decree; that C. B. Sharma made the awards and decrees were
obtained from the court on the basis of the said awards.
F
20. DW-3 - Sudhir Sharma who was the counsel for the
respondents stated that there was a dispute in regard to the
sale price of the property agreed to be sold by appellants to
respondents. There was a panchayat on 12.3.1992 where it
G was agreed that the sale price should be increased by
Rs.200,000/-. In addition to the earnest money of Rs.100,000/
-, earlier paid, another sum of Rs. fifteen lakhs was paid in cash
by the defendants to the plaintiffs in full and final settlement
before the members of the panchayat. The parties felt that the
expenses of stamp duty and registration of sale deed would
H
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 479
ETC. [R.V. RAVEENDRAN, J.]
be high and agreed for an arbitration award and a decree in A
terms of it. The panchayat resolved the dispute at a~ound 1.30
p.m. Both parties and C.B. Sharma thereafter came to his
chamber. The agreements dated 12.3.1992 referring disputes
to arbitration, were prepared by the arbitrator C.B. Sharma.
The said agreements were signed by the parties in his (Sudhir B
Sharma's) office. The parties had also given their statements
to C.B. Sharma in his office. The arbitrator made the awards
on 13.3.1992. On the i,nstructions of respondents (Furu Ram
and Kalu Ram), he filed the two suits under sections 14 & 17
of the Act for making decree in terms of the two awards in the c
sub-court on 16.3.1992. The owners of the land Ramesh Kumar'
and Naresh Kumar were impleaded as defendants 1 and 2 in
the said two suits and the Arbitrator C.B. Sharma was
impleaded as the third defendant. C.B. Sharma, represented
defendants and 1 and 2 as their counsel in the two suits. The 0
court recorded the statements of both parties. After the
statements of the appellants (defendants in those suits) were
recorded by the court, they were identified by their counsel C.B.
Sharma. He stated (in cross-examination) that the payment of
Rs.15 lakhs was made after the appellants made statements
E
before court agreeing for a decree in terms of awards.
21. DW-4 Chander Pal Singh stated that he was
instrumental in getting the parties to enter into the agreement
of sale; that dispute arose as respondents wanted to register
sale deeds showing a lesser consideration and appellants F
wanted the sale deed for the full consideration; that therefore
a panchayat was conveyed; that he was present when the
negotiations took place before the panchayat and settlement
was reached by agreeing for a price of Rs.16 lakhs; that Rs.15
lakhs was paid by Ram Kumar (Power of Attorney Holder of
respondents) to appellants in the presence of Panchayat G
consisting of himself, Purushottam, Harbhajan and Sudhir
Sharma. Sudhir Sharma, counsel for respondents got
C.B.Sharma as Arbitrator to make an award. After the decrees
were made in terms of the awards, he tore the receipt for Rs.15
lakhs given by appellants. H
480 SUPREME COURT REPORTS [2011) 10 S.C.R.
A 22. The respondents' version of what transpired as
emerging from the evidence of their four witnesses (OW1 to
DW4) (shorn of inconsistencies in the evidence) can thus be
summarized as follows : The sale in terms of the agreement of
sale dated 18.10.1991 did not take place, as the appellants
s unreasonably demanded an increase in price for executing the
sale deed. The dispute was brought up before a panchayat. It
was agreed before the panchayat that the respondents should
pay a sum of Rs.15,00,000 in addition to earnest money of
Rs.1,00,000/-, thereby increasing the price to Rs.16,00,000/-
C instead of Rs.14,22,000/-. The respondents paid the entire
balance of Rs.15,00,000/- in cash in a lump sum to the
appellants in the presence of the panchayat. To avoid the heavy
expenditure towards stamp duty and registration charges for
the sale deed, it was agreed that arbitration awards would be
obtained in favour of respondents and the appellants would
0
agree for decrees in terms of the awards, so as to confer title
upon the respondents, instead of executing sale deeds. In
pursuance of it, the parties entered into two agreements dated
12.3.1992 appointing C.8. Sharma, Advocate, as arbitrator.
E The said arbitrator recorded the statements of parties on
12.3.1992 and made awards dated 13.3.1992 declaring Furu
Ram to be the owner in possession of 49 Kana ls 10 Marlas of
land and Kalu Ram to be the owner of 49 Kanals and 9 Marlas
of land. Thereafter, Furu Ram and Kalu Ram filed petitions under
sections 14 and 17 of the Arbitration Act, 1940 in the Court of
F the Senior Sub Judge, Kurukshetra praying that the awards in
their favour be made the rule of the court. By orders dated
30.3.1992 the court directed decrees be drawn up in terms of .
the award. In pursuance of the decrees, Furu Ram and Kalu
Ram also got the lands mutated to their names. The decrees
G dated 30.3.1992 in terms of the awards were valid and binding,
and neither the decrees nor the awards were fraudulent.
23. We may now refer to the documentary evidence
produced by the defendants - respondents, which narrate a
H completely different story.
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 481
ETC. [R.V. RAVEENDRAN, J.]
24. The reference agreements dated 12.3.1992, the A
statements recorded by the Arbitrator on 12.3.1992 and the
awards dated 13.3.1992, all stated that appellants had
borrowed Rs.8 lacs from Furu Ram and Rs.8 lacs from Kalu
Ram in November 1991 and had agreed to repay the same
with interest at the rate of 2% per month that as they were not B
able to repay the amounts borrowed with interest, they agreed
to give 49 kanals 10 marlas of land to Furu Ram and 49 kanals
~marlas of land to Kalu Ram and delivered possession and
confirmed the same before the arbitrator. The arbitral awards
stated that the disputes relating to payment of Rs.8 lacs with c
interest thereon were referred to the Arbitrator, that the
appellants had admitted borrowing Rs.8 lacs from Furu Ram
and Rs.8 lacs from Kalu Ram and further admitted that being
unable to pay the said amount, had given 49 kanals 10 marlas
of land to Furu Ram and 49 kanals 9 marlas of land to Kalu D
Ram and therefore, Furu Ram has become the owner of 49
Kana ls and 10 Marlas of land and Kalu Ram had become the
owner of 49 kanals and 9 marlas of land.
25. The identical plaints dated 13.3.1992 in the two suits
(CS Nos.366-367 of 1992) under sections 14 and 17 of the E
Arbitration Act, 1940 filed by Furu Ram and Kalu Ram read as
under:
"Application u/s 14/17 of the Arbitration Act to make the
award dated 13.3.1992 the rule of the court.
F
Sir,
It is prayed as under:-
1. That the respondents no.1 and 2 had borrowed a sum
of Rs.8,00000/- from the applicant-plaintiff. G
2. That the respondents no.1 and 2 failed to repay the
amount and interest to applicant - plaintiff.
3. That vide agreement dt.12-3-1992 the respondent no.3
was appointed as Arbitrator to decide the matter. H
482 SUPREME COURT REPORTS (2011] 10 S.C.R.
A 4. That the respondent no.3 has decided the matter vide
award dated 13-3-1992.
5. That the applicant - plaintiff has been declared as owner
in possession of the property mentioned in the award
enclosed herewith.
B
6. That the applicant - plaintiff has been put in possession
of the said property at tfie spot and is debarred from
recovering the amount and interest from the respondents
no.1 and 2.
c
7. That the respondents no.1 and 2 have refused to admit
the award.
8. That the agreement and award were executed at
Thanesar, Kurukshetra so this learned court has got
D
jurisdiction to try this application.
9. That the required court fees is paid on the application.
It is, therefore, prayed that the award dated 13-3-1992 may
E kindly be made the rule of the court whereby the plaintiff-
applicant may kindly be declared as owner in possession of
the land measuring 49 Kanals 10 Marlas detailed as under:-"
[Note : The other plaint by Kalu Ram was identical except
the extent which was 49 kanals 9 marlas and the description
F of the lands].
26. The written statements were also filed on the same day
the suits were filed, that is 16.3.1992. The written statements
were not signed by either of the appellants but were signed by
G C.B. Sharma {defendant no.3 in those suits) as advocate for
the defendants 1 and 2 {appellants). The brief written
statements stated that paras 1 to 7 of the plaint were correct
and admitted and that paras 8 and 9 were legal and that
therefore the suit be decreed.
H
RAMESH KUMA~ & ANR. v. FURU RAM & ANR. 483
ETC. [R.V. RAVEENDRAN, J.]
27. The order-sheets dated 16.3.1992 in the said two suits, A
recorded that the appellants (defendants 1 & 2 in the suits)
appeared and stated that they had no objection for decrees
being made in terms of the award. The appellants signed the
order-sheets and were identified by the arbitrator C.B. Sharma
as their counsel. The cases (C.S.Nos.366 arid 367 of 1992) B
thereafter came up before the learned Sr.Sub-Judge on
30.3.1992. The parties were not present. The orders of the
court dated 30.3.1992 in both suits were identical and they are
extracted below :
"Present : Counsel for the parties.
c
Heard. Since the parties are not at issue, so the award
dated 13.3.1992 - Ex C 1 is made the rule of the court.
Decree sheet be prepared accordingly and the award
dated 13.3.1992 - Ex C1 shall form the part of the decree D
sheet. The file be consigned to the record room."
28. We find three different versions from the pleadings and
evidence led by the respondents. The case set forth in their
written statements was completely different from the case made E
out in the evidence of their witnesses DW1, DW2, DW3 and
DW4. More interestingly, the case set forth in the written
statements and the case made out in the oral evidence were
completely different from what is stated in the documentary
evidence. Let us refer to them briefly.
F
(a) The written statements filed by the respondents merely
stated that the appellants did not execute the sale deed, on the
date fixed for sale, as per agreement of sale dated 18.10.1991
and therefore, and the said dispute was referred to arbitration
and awards were made by the arbitrator on the basis of their G
statements and decrees were made in terms of the award.
{b) The evidence of DW1 to DW4 was that' appellants
unreasonably demanded the price to be increased from
Rs.14,22,000/- to Rs.16,00,000/-, that the resultant dispute was H
484 SUPREME COURT REPORTS [2011) 10 S.C.R.
A referred to Panchayat, that a price of Rs.16,00,000/- was
agreed before the Panchayat on 12.3.1992, that immediately
the respondents paid the balance of Rs.15,00,000/- in cash to
the appellants in the presence of the panchayat, that the
respondents felt that the stamp duty and registration expenses
B were high and that therefore, it was agreed on the suggestion
of their counsel that they should resort to the process of getting
an arbitration award and decree to convey the title instead of
execution of a sale deed. It was stated that C. B. Sharma was
appointed as the arbitrator who made the awards and decrees
c were obtained in terms of the awards.
(c) The documentary evidence, that is the reference
agreements, the statements recorded by the Arbitrator, the
awards, the plaints in the suits under sections 14 and 17 of
Arbitration Act, 1940, on the other hand do not refer to the
D agreement of sale or the payment of price. They showed that
the appellants had borrowed Rs.8 lakhs from Furu Ram and
Rs.8 lakhs from Kalu Ram, about four months prior to
12.3.1992, and had agreed to repay the same with interest at
2% per month; that thereafter, Furu Ram and Kalu Ram
E demanded the money and the appellants were not in a position
to repay the loans and therefore a dispute arose; and that by
mutual consent, C.B. Sharma was appointed as an Arbitrator
and parties agreed to be bound by his decision. The appellants
allegedly made statements before C.B. Sharma (Arbitrator) ,
F admitting that they had taken Rs.8 lakhs from Furu Ram and
Rs.8 lakhs from Kalu Ram as loans, agreeing to repay the
same with interest at 2% per month, and that as they did not
have the means to repay the same, they had given 49 Kanals
10 Marlas to Furu Ram and 49 Kanals 9 Marlas of land to Kalu
G Ram and also delivered possession of r4lpective lands to Furu
Ram and Kalu Ram.
It is well settled that no amount of evidence contrary to the
pleading can be relied on or accepted. In this case, there is
variance and divergence between the pleading and
H
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 485
ETC. [R.V. RAVEENDRAN, J.]
documentary evidence, pleading and oral evidence and A
between the oral and documentary evidence. It is thus clear that
the entire case of the respondents is liable to be rejected. The
different versions clearly demonstration fraud and
misrepresentation on the part of the respondents.
B
29. The trial court in its judgment in C.S.Nos.63 and 64 of
1997 inferred from the evidence of DW1 (C.B. Sharma) and
DW3 (Sudhir Sharma) that appellants had knowledge of the full
facts and circumstances of the cases filed under sections 14
and 17 of the Arbitration Act and that with such knowledge, they C
had filed written statements therein, admitting the facts and,
therefore it could not be said that the judgments and decrees
dated 30.3.1992 were obtained by misrepresentation and
fraud. But the documentary evidence produced by the
respondents clearly showed that in CS Nos. 366 and 367 of
1992, no notice/summons were Issued to defendants; that D
appellants (defendants 1 & 2) did not sign the written
statements which admitted the plaint averments; that the
arbitrator who was the third defendant in those suits, very
strangely appeared as advocate for defendants 1 and 2
(appellants) and signed the written statement and made a E
statement before the court on 30.3.1992 that defendants did
not have any objection to the awards. All this lends credence
to the case of appellants that respondents had conspired with
DW1 and DW3 and got certain documents prepared and
persuaded appellants who were barely literate, to give their F
consent on 16.3.1992 by misrepresenting to them that they
were giving consent for giving their lands for cultivation to
respondents for a period of one and half years as per the
settlement. The trial court ignored relevant evidence and drew
a wrong inference that there was no fraud or misrepresentation. G
30. Let us now refer to the fraudulent manner in which the
orders were obtained from the Sr. Sub-Judge, Kurukshetra for
making decrees in terms of the award. According to the
evidence of respondents, the events took place as under :
H
486 SUPREME COURT REPORTS [2011] 10 S.C.R.
A Stage I (12.3.1992)
(a) Settlement before the Panchayat that 12.3.1992
appellants should sell the
property to the respondents for
Rs.16 lacs
B
(b) Decision of respondents to avoid 12.3.1992
stamp duty and registration charges
and instead have an arbitration
award through Advocate C. B. Sharma
as arbitrator and then get decrees in
c terms of the awards
(c) Reference agreements prepared by 12.3.1992
CB Sharma for referring the dispute
to himself
D (d) The signing of the reference 12.3.1992
agreement by parties
(e) Statements of parties recorded by 12.3.1992
CB Sharma in the office of
Sushil Sharma, Advocate for
E
respondents wherein appellants
confirmed that they had given
the lands to respondents
Stage II (13.3.1992)
F
(a) Awards made by the Arbitrator 13.3.1992
(b) Plaints under sections 14 and 17 13.3.1992
of Arbitration Act prepared by
G Sushil Sharma, on behalf of
respondents
Stage Ill (16.3.1992)
H (a) CS Nos.366 and 367 of 1992 under 16.3.1992
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 487
ETC. [R.V. RAVEENDRAN, J.]
sections 14 and 17 of the Arbitration A
Act filed by respondents on
(b) Written statements in the said suits 16.3.1992
signed by C.B. Sharma as Advocate
for appellants (defendants in the suit)
filed on B
(c) The statements of appellants that 16.3.1992
they were consenting to the decree,
recorded by the court on
Stage IV
c
(a) Orders made directing decrees being 30.3.1992
drawn up in terms of the award
(b) Undated declaration by appellants 31.3.1992 D
confirming that they had agreed
for decrees in favour of Furu Ram
and Kalu Ram attested by an Executive
Magistrate (with the endorsement
"I know Naresh Kumar and Ramesh E
Kumar and they have signed in my
presence made" by Sushil Sharma,
advocate for respondents)
The above narration will show that even according to the
evidence produced by the respondents the entire arbitration F
was sham and nominal, that an alleged Panchayat had settled
the dispute on 12.3.1992, that thereafter, Sushil Sharma,
advocate for respondents arid C.B. Sharma, an advocate who
was made to act as an Arbitrator at the instance of respondents
created a bunch of documents and obtained the signatures of G
the appellants and created proceedings for obtaining decrees
in terms of the awards.
31. C. B. Sharma was an advocate engaged by
respondents through their counsel Sushi! Sharma, to make
awards in their favour. On 12.3.1992, he is appointed as H
488 SUPREME COURT REPORTS [2011] 10 S.C.R.
A arbitrator. On 13.3.1992, he makes the awards and gives them
to respondents. On 16.3.1992, he signs the written statements
of defendants (appellants herein) in the proceedings under
sections 14 and 17 of Arbitration Act, 1940 as their counsel.
Though he is the third defendant in the said two suits (C.S.
s Nos.366 and 367 of 1992), he appears as the counsel for
defendants 1 and 2 without their consent or knowledge. On
30.3.1992, he makes a statement on behalf of defendants 1
and 2 that they have no objection for decrees being made. We
fail to understand how a counsel can do these things. His acts
c are fraudulent.
32. We may next refer to the inconsistencies and
improbabilities in the evidence. According to respondents, the
appellants had refused to execute the sale deed, for the price
of Rs.14,22,000/- and demanded an increase in the price; that
D in the presence of a panchayat, an increase in price was
agreed on 12.3.1992, and that the entire balance price of
Rs.15,00,000/- was immediately paid in cash on 12.3.1992 in
the presence of the panchayat. While DW2 says that
Rs.15,00,000/- was paid in cash in the presence of the
E Panchayat. DW-3 Sudhir Sharma states that the payment was
made after the appellants made a statement before the court
agreeing for a decree in terms of the awards, that is on
16.3.1992. Further, it is highly improbable that the respondents
would have attended the Panchayat readily carrying
F Rs.15,00,000/- in cash and paid it immediately after the
settlement. If the said evidence is accepted, the entire
documentary evidence showing that two sums of Rs.800,00/-
each were given as loans to appellants about four months prior
to 12.3.1992 and the lands were given to respondents as
G appellants could not repay the same are proved to be false and
fraudulent.
33. We may next refer to the stamp fraud committed by
respondents. According to the DW-1 to DW-4 under the
agreement of sale dated 18.10.1991, the sale price agreed
H
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 489
ETC. [R.V. RAVEENDRAN, J.]
was Rs.1(22,000L-, that in the presence of a panchayat, there A
was a settlement anC:l the price was increased to Rs.16,00,000
for 98 kanals 19 marlas of land, that the said price was paid
half being the sale price in regard to an extent of 49 Kana ls 10
marlas sold to Furu Ram and the remaining half being the sale
price in regard to an extent of 49 Kanals 9 Marlas sold by B
appellants to Furu Ram and Kalu Ram. The respondents
wanted to avoid payment of stamp duty and registration
charges on the sale deeds. They were advised by their lawyer
that they could get decrees from a civil court in terms of an
arbitration award so that sale deeds need not be executed and c
stamp duty and registration ·charges need not be paid. It was
decided by the respondents on the advice of their lawyer to
get arbitration awards declaring them as owners and also get
court decrees in terms of the awards . . On the same day
(12.3.1992) their lawyer got reference agreements prepared
0
through the arbitrator C.B. Sharma which were executed by the
parties to get arbitration awards by consent. In short the
agreements, arbitration awards and decrees were sham and
nominal, the object of respondents being to evade the stamp
duty and registration charges payable with respect to a sale E
deed, by obtaining decrees from the court in terms of the
awards which declared their title.
34. Let us refer to another facet of such stamp fraud. There
can be a reference to arbitration only if there is a dispute and
there is an agreement to settle the dispute by arbitration. If the F
parties had already settled the disputes before a panchayat for
sale of half of the property to Furu Ram and another half to Kalu
Ram for a consideration of Rs.8,00,000 plus Rs.8,00,000/-, and
appellant had received the entire consideration, and delivered
possession, there was no dispute between the parties, that G
could be referred to arbitration. The respondents, on the advice
of their advocate Sudhir Sharma decided to have a nominal
and sham arbitration proceedings and awards by C.B. Sharma
and get decrees made in terms of the awards, only to avoid
stamp duty and registration charges. The entire procedure was H
490 SUPREME COURT REPORTS [2011] 10 S.C.R.
A fraudulent because (i) there was no dispute between the parties;
(ii) there was no reference of any dispute to arbitration; (iii) the
reference agreements dated 12.3.1992 were prepared and
executed in pursuance of a pre-existing arrangement to have
a collusive awards; (iv) the arbitrator was not required to decide
B any dispute between the parties, nor was there any adjudication
of the dispute by the arbitrator. DW-1 who claims to be the
arbitrator clearly stated in his evidence, that the reference under
the agreements dated 12.3.1992 was in regard to a dispute
relating to loan of Rs.800,000/- advanced to each appellant.
c Therefore, the statements in the two awards that the reference
agreements dated 12.3.1992 were in regard to a dispute in
regard to the failure to repay the two loans of Rs.800,000/- each
and interest thereon; that the appellants admitted before the
Arbitrator that they had borrowed Rs.8,00,000 from Furu Ram
and Rs.8,00,000 from Kalu Ram; that the appellants did not
0
have the means to repay the same and that instead of repaying
the amount with interest, that they haJ therefore given to Furu
Ram an extent of 49 Kanals 10 Marlas and to Kalu Ram, 49
Kanals 9 marlas of land; that Furu Ram and Kalu Ram
E confirmed that they had already taken the said lands in lieu of
the amount due to them, are also false and at all events, sham
averments to create two awards. The references to arbitration,
the proceedings before the arbitrator, the awards of the
arbitrator, and the proceedings in court to get decrees in terms
of the awards, and the decrees in terms of the award were all
F thus sham and bogus, the sole fraudulent object being to avoid
payment of stamp duty and registration charges .
.
35. The modus operandi adopted by the respondents to
obtain title to lands without a conveyance and without incurring
G the stamp duty and registration charges due in respect of a
conveyance by obtaining a sham and collusive arbitration
awards when there was no dispute, and then obtaining a
nominal decree in terms of the said awards would be a fraud
committed upon the court and the state government by evading
H liability to pay the stamp duty and registration charges. The
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 491
ETC. [R.V. RAVEENDRAN, J.]
irregularities, illegalities, suppressions and misrepresentations A
which culminated in the orders dated 30.3.1992 in CS NOs.366
and 367 of 1992 directing that the awards dated 13.3.1992 be
made decrees of the court, show that the decrees in terms of
the awards were obtained fraudulently.
B
36. Normally, this Court would not interfere with a finding
of fact relating to fraud and misrepresentation. But as material
evidence produced by the defendants - respondents had been
ignored and as the courts below failed to draw proper
inferences therefrom and had ignored a cause of fraud, we are
constrained to interfere with reference to a question of fact. The C
suits were decreed by the trial court on the ground that the
decrees were null and void and all the reliefs sought were
granted. When the decrees dated 30.3.1992 were held to be
null and void, the question of plaintiffs challenging any other
finding in the judgment did not arise. Therefore when the first D
appellate court and High Court held that the decree was not
null and void, the plaintiffs-appellants were entitled to urge all
grounds to show that the entire transaction and arbitration
proceedings were fraudulent and the decree was also a result
of fraud. Be that as it may. E
Re : Point (iii)
37. Chapter Ill of Registration Act, 1908 relates to
registrable documents. Section 17 enumerates the documents
which are compulsorily registrable and the exceptions to the F
categories of documents which are compulsorily registrable.
The relevant portions of the said sections are extracted below:
"17. Documents of which registration is compulsory
G
(1) The following documents shall be registered, if the
property to which they relate is situate in a district in which,
and if they have been executed on or after the date on
which, Act No. XVI of 1864, or the Indian Registration Act,
1866, or the Indian Registration Act, 1871, or the Indian
H
492 SUPREME COURT REPORTS [2011] 10 S.C.R.
A Registration Act, 1877 or this Act came or comes into
force, namely:-
)()()( )()()( )()()(
(b) other non-testamentary instruments which purport or
B operate to create, declare, assign, limit er extinguish,
whether in present or in future, any right, title or interest,
whether vested or contingent, of the value of one hundred
rupees, and upwards, to or in immovable property;
c (c) non-testamentary instruments which acknowledge the
receipt or payment of any consideration on account of the
creation, declaration, assignment, limitation or extinction
of any such right, title or interest; and
(2) Nothing in clauses (b) and (c) of sub-section (1) applies
D to-
)()()( )()()( )()()(
(vi) any decree or order of a court except a decree or order
E expressed to be made on a compromise, and comprising
immovable property other than that which is the subject-
matter of the suit or proceeding]."
38. A reading of these provisions make the following
position clear (a) any non-testamentary document purporting or
F operating to create, declare any right, title or interest in any
immoveable property of the value of more than Rs.100 is
compulsorily registrable; (b) that an order or decree of a court
is not compulsorily registrable even if it purports or operates
to create, declare any right, title or interest in any immoveable
G property of the value of more than Rs.100; (c) that if the decree
or order of the court is not rendered on merits, but expressed
to be made on a compromise and comprises any immoveable
property which was not the subject mater of the suit or
proceeding, such order or decree is compulsorily registrable;
H
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 493
ETC. [R.V. RAVEENDRAN, J.]
and (d) that as clause (iv) of sub-section (2) of section 17 A
excludes decrees or .orders of court, but does not exclude
awards of arbitrator, any arbitration award which purports or
operates to create, declare any right, title or interest in any
immoveable property of the value of more than Rs.100 is
compulsorily registrable. B
39. As noticed above, the reference agreements dated
12.3.1992 were not in regard to any agreement of sale or any
dispute relating to immoveable property, or in regard to the
lands in regard to which the award was made. It did not refer
to the lands in question. No dispute regarding immoveable C
property was referred to arbitration or was the subject matter
of the arbitration. The alleged subject matter of arbitration was
non-payment of Rs.8,00,000 said to have been borrowed by
each of the appellants. The arbitrator recorded an alleged
statement by the borrowers (appellants) that they had received D
Rs.8,00,000 from Furu Ram and Rs.8,00,000/- from Kalu Ram;
that they were not able to refund the same and therefore they
had given lands measuring 49 Kanals 10 Marlas to Furu Ram
and another 49 Kanals 9 Marlas to Kalu Ram; and that Furu
Ram and Kalu Ram confirmed that they had obtained E
possession of the said land. The awards therefore declared that
Furu Ram and Kalu Ram had become the absolute owners of
the lands in question. Thus the awards are clearly documents
which purport or operate to create and declare a right, title or
interest in an immoveable property of the value of more than F
Rs.100 which was not the subject of the dispute or reference
to arbitration. Therefore the awards were compulsorily
registrable. If they were not registered, they could not be acted
upon under section 49 of the Registration Act, 1908 nor could
a decree be passed in terms of such unregistered awards. G
,Unregistered awards which are compulsorily registrable under
section 17(1)(b) could neither be admitted in evidence nor can
decrees be passed in terms of the same.
40. In Ratan Lal Sharma vs. Purshottam Harit AIR 1974 H
494 SUPREME COURT REPORTS (2011) 10 S.C.R.
A SC 1066, this court held :
"So in express words it purports to create rights in
immovable property worth above Rs.100/- in favour of the
appellant. It would accordingly require registration under
S.17, Registration Act. As it is unregistered, the Court
B
could not look into it. If the court could not, as we hold, look
into it, the Court not pronounce judgment in accordance
with it. Sec. 17, Arbitration Act presupposes an award
which can be validly looked into by the Court. The
appellant cannot successfully invoke Section 17......... we
c are of opinion that the award requires registration and, not
being registered is inadmissible in evidence for the
purpose of pronouncing judgment in accordance with it."
In Lachhman Dass vs. Ram Lal - 1989 (3) SCC 99, this
D Court held :
"In the present case the award declared that half share of
ownership of the appellant to the lands in question "shall
now be owned" by the respondent in addition to his half
share in the lands. On a proper construction of the award,
E
it is thus clear that the award did create, declare or assign
a right, title and interest in the immovable property. It is not
merely a declaration of the pre-existing right but creation
of new right of the parties. Since the award affected the
immovable property over Rs.100 it was required to be
F registered ............. ..
An award affecting immovable property of the value of
more than Rs.100 cannot be looked into by the court for
pronouncement upon the award on the application under
G Section 14 of the Arbitration Act unless the award is
registered .......... ..
As the court could not look into the award, there is no
question of the court passing a decree in accordance with
the award and that point can also be taken when the award
H
RAMESH KUMAR & ANR. v. FURU RAM & ANR. 495
ETC. [R.V. RAVEENDRAN, J.]
is sought to be enforced as the rule of the court. A
The courts below have not considered or decided this
aspect at all.
Re: Question (iv)
B
41. If an award was not genuine, but was collusive and
sham, the court will not and in fact can not make it a rule of the
court. As noticed above, there should be a dispute, there
should be an agreement to refer the dispute to arbitration, there
should be reference to arbitration, there should be an C
adjudication or decision by the arbitrator after hearing parties,
for a valid arbitration. If the parties had already settled their
disputes and the arbitration award was only a ruse to avoid
payment of stamp duty and registration with respect to a sale
deed and declare a title in persons who did not have title earlier, o
then the entire proceedings is sham and bogus. In fact, C.B.
Sharma was not really an arbitrator, nor the proceedings before
him were arbitration proceedings and the awards were not
really arbitration awards. if all these facts which have a bearing
on the making of the award and the validity of the award are E
suppressed before the court and the court was misled into
making decrees in terms o.f the awards, necessarily the
proceedings are fraudulent and amounted to committing fraud
on the court. In these circumstances the decree in CS Nos.366
and 367 of 1992 on the file of the Sr. Sub-Judge, Kurukshetra
were invalid.
F
1
Conclusion
42. We, therefore allow these appeals, set aside the
judgments of the first appellate court and High Court and G
restore the decrees of the trial court decreeing the suits filed
by the appellants.
R.P. Appeals allowed.
H
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