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SPECIFIC PERFOMANCE OF CONTRACT, ARBITRATION AGREEMENT, FRAUD ON COURT TO AVOID STAMP DUTY AND REGISTRATION – 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 . 2 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.

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AWARD – REGISTRATION COMPULSORY.

“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.


FRAUD

          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 


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.      


                                                               Reportable
                    IN THE SUPREME COURT OF INDIA
                      CIVIL APPELLATE JURISDICTION
                   CIVIL APPEAL NOS. 7085-7086 OF 2011
              [Arising out of SLP (C) Nos. 10049-10050 of 2010]
Ramesh Kumar & Anr.                                               … Appellants
                                          Vs.
Furu Ram & Anr. etc.                                                   … Respondents
                                  J U D G M E N T
R.V.RAVEENDRAN, J.
       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
.
                                              2
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.
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
.
                                              3
aforesaid 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
.
                                             4
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
.
                                              5
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.
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
.
                                              6
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
.
                                               7
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
.
                                                 8
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?
.
                                             9
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
.
                                              10
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
.
                                                    11
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 :
        (1)     the suggestion, as a fact, of that which is not true, by one who does
                not believe it to be true;
        (2)     the active concealment of a fact by one having knowledge or belief
                of the fact;
        (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   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
.
                                                    12
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.
.
                                            13
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,
.
                                              14
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
.
                                              15
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
.
                                                16
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
.
                                            17
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
.
                                               18
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
.
                                            19
entered   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
.
                                                 20
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:-
       1. That the respondents no.1 and 2 had borrowed a sum of Rs.8,00000/-
       from the applicant-plaintiff.
       2. That the respondents no.1 and 2 failed to repay the amount and interest
       to applicant – plaintiff.
.
                                                    21
       3. That vide agreement dt.12-3-1992 the respondent no.3 was appointed as
       Arbitrator to decide the matter.
       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.
       6.   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.
       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 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 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.
.
                                               22
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.
.
                                             23
(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
.
                                              24
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)   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
.
                                              25
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   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
.
                                           26
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
.
                                              27
           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
.
                                             28
Arbitration 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
.
                                             29
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.
.
                                              30
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
.
                                            31
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.
.
                                             32
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
.
                                                    33
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-
.
                                              34
                                           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.
.
                                              35
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
.
                                                     36
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.”
.
                                              37
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,   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
.
                                             38
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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