2011 (8) TMI 1314 - SC - Indian Laws

Summary

Issues Involved:
1. Maintainability of the suits filed by the appellants.
2. Allegations of fraud and misrepresentation by the respondents in obtaining the decrees.
3. Validity of the arbitration awards dated 13.3.1992 for want of registration.
4. Validity of the orders dated 30.3.1992 directing the awards be made the rule of the court.

Issue-wise Detailed Analysis:

1. Maintainability of the Suits:
The appellants sought a declaration that the orders dated 30.3.1992, the decrees drawn in terms of the awards dated 13.3.1992, and the agreements dated 12.3.1992 were null and void due to fraud and misrepresentation. The challenge was primarily to the orders making the awards the rule of the court. The first appellate court and the High Court erroneously concluded that the suits were barred by sections 32 and 33 of the Arbitration Act, 1940, which was incorrect as the challenge was to the court orders and decrees obtained through fraud, not merely to the arbitration agreements and awards.

2. Allegations of Fraud and Misrepresentation:
The agreements dated 12.3.1992, the awards dated 13.3.1992, and the resulting court decrees were found to be fraudulent. Fraud involves deceit, concealment of material facts, and abuse of confidence. The appellants alleged they were misled into signing documents under the belief they were related to a panchayat settlement, not realizing they were consenting to arbitration awards and court decrees. The respondents' witnesses provided inconsistent and contradictory evidence, and the appellants did not sign the written statements in the suits. The entire arbitration process was a sham, orchestrated to avoid stamp duty and registration charges, demonstrating clear fraud and misrepresentation.

3. Validity of the Arbitration Awards for Want of Registration:
The arbitration awards created rights in immovable property and were thus compulsorily registrable under Section 17 of the Registration Act, 1908. As the awards were not registered, they could not be acted upon under Section 49 of the Registration Act. The awards were inadmissible in evidence, and decrees could not be passed based on unregistered awards. This principle was upheld in precedents like Ratan Lal Sharma vs. Purshottam Harit and Lachhman Dass vs. Ram Lal.

4. Validity of the Orders Directing the Awards be Made the Rule of the Court:
The arbitration proceedings were found to be collusive and sham, with no genuine dispute being referred to arbitration. The entire process was a ruse to avoid stamp duty and registration charges. The arbitrator, C.B. Sharma, acted fraudulently, and the court was misled into making decrees in terms of the awards. Therefore, the decrees dated 30.3.1992 were invalid as they were obtained through fraudulent means.

Conclusion:
The Supreme Court allowed the appeals, set aside the judgments of the first appellate court and the High Court, and restored the decrees of the trial court, which had decreed the suits filed by the appellants. The court recognized the fraudulent nature of the arbitration proceedings and the resulting decrees, emphasizing the importance of genuine dispute resolution and adherence to legal procedures.