Ramesh Kumar & ANR.
Vs. Furu Ram & ANR. etc.
J U D G M E N T
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 equal shares, in lands
measuring in all 98 Kanals and 19 marlas situated in village Udana, Tehsil
Indri, District Karnal. They entered into an agreement to sell the said lands
to the sons of Furu Ram and Kalu Ram (brothers) the respective first respondent
in these two appeals, on 18.10.1991 for a consideration of 2Rs.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.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 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 for a period of one and half years without any rent
in satisfaction and discharge of the claim for refund of Rs.100,000/-. In
pursuance of the said 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 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 3aforesaid settlement. The
respondents also asked the appellants to appear in court and confirm the same. The
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 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 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 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 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 agreements, awards and as also the
plaints in CS Nos.366 and 367 of 1992 that appellants had borrowed Rs.8 lacs from
Furu Ram and Rs.8 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 not able to repay the two loans of Rs.800,000/- each, were all false. They
alleged that they had not engaged any counsel for 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 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 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 pursuance of the said decrees were all null 5and
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.
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 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 as respondents and made the awards. They contended
that the awards made by the arbitrator and the decrees made in terms of the
awards were lawful and valid. The Proceedings
7.
In
the two suits filed by appellants (C.S.Nos.63 and 64 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 filing the suits, by their own conduct; and
whether the suits were bad for 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 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 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 court 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 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 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.
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 (Addl. District
Judge, Kurukshetra) by judgment dated 3.8.2004 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 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 section 33 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 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 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. 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 are as under:
(i) Whether the suits
by appellants were not 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 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 the said awards be made the rule of the
court, invalid? Re: Question (i)
11.
The
appellants sought a declaration that the orders 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
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, 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 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 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 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 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 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. 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 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 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 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 `fraud' thus : "17. `Fraud' defined.-`Fraud'
means and includes any of 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 :
a. the suggestion, as a
fact, of that which is not true, by one who does not believe it to be true;
b. the active
concealment of a fact by one having knowledge or belief of the fact;
c. a promise made without
any intention of performing it;
d. any other act fitted
to deceive;
e. any such act or omission
as the law specially 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 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 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,
deception, concealment.
14.
Differently
nuanced contextual meanings of the word `fraud' are collected in P.Ramnatha Aiyar's
Advanced Law Lexicon (3rd Edition, Book 2, Page 1914-1915). We may extract two
of them : "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 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 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 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 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
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 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 inference that if the defendants had
examined themselves, their evidence would have been unfavourable to them (vide
section 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 DW 2; Sudhir Sharma, their
Advocate who appeared in C.S.No.366 and 367 of 1992, 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 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 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 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 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.D4 dated 16.3.1992 and he identified
them as their counsel before the court. On further 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 purchase of land.
He stated that the
parties submitted an arbitration agreement in regard to a loan and that he gave
the awards in regard to the loan; and that the 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 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 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
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; 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.
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 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 be high and
agreed for an arbitration award and a decree in terms of it. The panchayat
resolved the dispute at around 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 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 instructions
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 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 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 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 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 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.
22.
The
respondents' version of what transpired as emerging from the evidence of their
four witnesses (DW1 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 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/- 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
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 19entered into two agreements dated 12.3.1992 appointing C.B. Sharma,
Advocate, as arbitrator. 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 Kanals 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 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 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 completely different story.
24.
The
reference agreements dated 12.3.1992, the 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 able to repay the amounts borrowed with interest, they agreed
to give 49 kanals 10 marlas of land to Furu Ram and 49 kanals 9 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 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 Ram and therefore, Furu Ram has
become the owner of 49 Kanals 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 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. Sir, It is prayed as under:-
a. That the respondents
no.1 and 2 had borrowed a sum of Rs.8,00000/- from the applicant-plaintiff.
b. That the respondents
no.1 and 2 failed to repay the amount and interest to applicant - plaintiff. 21
c. That vide agreement
dt.12-3-1992 the respondent no.3 was appointed as Arbitrator to decide the
matter.
d. That the respondent
no.3 has decided the matter vide award dated 13- 3-1992.
e. That the applicant -
plaintiff has been declared as owner in possession of the property mentioned in
the award enclosed herewith.
f. That the applicant - plaintiff
has been put in possession of the said property at the spot and is debarred from
recovering the amount and interest from the respondents no.1 and 2.
g. That the respondents
no.1 and 2 have refused to admit the award.
h. That the agreement
and award were executed at Thanesar, Kurukshetra so this learned court has got
jurisdiction to try this application.
i. That the required
court fees is paid on the application. It is, therefore, prayed that the award
dated 13-3-1992 may 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 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 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.
27.
The
order-sheets dated 16.3.1992 in the said two suits, 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 and 367 of 1992) 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. Heard. Since the
parties are not at issue, so the award dated 13.3.1992 - Ex C1 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 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 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.
(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 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 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 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 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 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 demanded the money and the appellants were not in a position to repay 24the
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) 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 Ram and also delivered possession of respective 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 documentary evidence, pleading
and oral evidence and 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.
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 had filed written statements
therein, admitting the facts 25and, 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 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 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 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.
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 : Stage I
(12.3.1992)
(a) Settlement before
the Panchayat that appellants 12.3.1992 should sell the property to the respondents
for Rs.16 lacs
(b) Decision of
respondents to avoid stamp duty and 12.3.1992 registration charges and instead
have an arbitration award through Advocate C. B. Sharma as arbitrator and then get
decrees in terms of the awards
(c) Reference
agreements prepared by CB Sharma for 12.3.1992 referring the dispute to himself
(d) The signing of
the reference agreement by parties 12.3.1992
(e) Statements of parties
recorded by CB Sharma in 12.3.1992 the office of Sushil Sharma, Advocate for respondents
wherein appellants confirmed that they had given the lands to respondents
Stage II
(13.3.1992)(a) Awards made by the Arbitrator 13.3.1992(b) Plaints under
sections 14 and 17 of Arbitration Act 13.3.1992 prepared by Sushil Sharma, on behalf
of respondents Stage III (16.3.1992)(a) CS Nos.366 and 367 of 1992 under sections
14 16.3.1992 and 17 of the Arbitration Act filed by respondents on(b) Written
statements in the said suits signed by C.B. 16.3.1992 Sharma as Advocate for
appellants (defendants in the suit) filed on
(c) The statements of
appellants that they were 16.3.1992 consenting to the decree, recorded by the
court on Stage IV (a) Orders made directing decrees being drawn up in 30.3.1992
terms of the award (b) Undated declaration by appellants confirming that 31.3.1992
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
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 was sham and nominal, that an alleged Panchayat had settled the dispute
on 12.3.1992, that thereafter, Sushil Sharma, advocate for respondents and 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 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 Sushil
Sharma, 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 herein) in
the proceedings under sections 14 and 17 of 28Arbitration Act, 1940 as their
counsel. Though he is the third defendant in the said two suits (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. We fail to
understand how a counsel can do these things. His acts 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 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 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
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 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 was
Rs.14,22,000/-, that in the presence of a panchayat, there was a settlement and
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
Kanals 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 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 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 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 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 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 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 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 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.
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 have the means to repay the same and
that instead of repaying the amount with interest, that they had 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 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 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 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 liability
to pay 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, show that the decrees in terms of the
awards were obtained fraudulently.
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 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
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. Re : Point (iii)
37.
Chapter
III 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 which are compulsorily registrable. The relevant
portions of the said sections are extracted below: "17. Documents of which
registration is compulsory (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 Registration Act, 1877 or this
Act came or comes
into force, namely:- xxx xxx xxx (b) other non-testamentary instruments which
purport or operate to create, declare, assign, limit or 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) 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 to- xxx xxx xxx (vi) any decree or order of a court except a decree
or order 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 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 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; and (d) that as clause (iv) of sub-section (2) of section 17 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.
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 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
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 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 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. 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 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 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 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 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, 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 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 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 is
sought to be enforced as the rule of the court." The courts below have not
considered or decided this aspect at all. Re: Question (iv)
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, and 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 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, 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 suppressed before the court and the court was misled into making decrees in
terms of 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. Conclusion
42.
We,
therefore allow these appeals, set aside the judgments of the first appellate court
and High Court and restore the decrees of the trial court decreeing the suits
filed by the appellants.
............................J.
(R. V. Raveendran)
............................J.
(A.K. Patnaik)
New
Delhi;
August
18, 2011
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