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TMI Blog2011 (8) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 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 aforesaid settlement. The respondents also asked the appellants to appear in court and confirm the same. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 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 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 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'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reements 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 ₹ 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 16 lakhs; that ₹ 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 ₹ 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 ₹ 15,00,000 in addition to earnest money of ₹ 1,00,000/-, thereby increasing the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 ₹ 8,00000/- from the applicant-plaintiff. 2. That the respondents no.1 and 2 failed to repay the amount and interest to applicant - plaintiff. 3. That vide agreement dt.12-3-1992 the respondent no.3 was appointed as Arbitrator to decide the matter. 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 possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tten 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 ₹ 14,22,000/- to ₹ 16,00,000/-, that the resultant dispute was referred to Panchayat, that a price of ₹ 16,00,000/- was agreed before the Panchayat on 12.3.1992, that immediately the respondents paid the balance of ₹ 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1992, he makes the awards and gives them to respondents. On 16.3.1992, he signs the written statements of defendants (appellants herein) in the proceedings under sections 14 and 17 of Arbitration Act, 1940 as their counsel. Though he is the third defendant in the said two suits (C.S. 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 ₹ 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 ₹ 15,00,000/- was immediately paid in cash on 12.3.1992 in the presence of the panchayat. While DW2 says that ₹ 15,00,000/- was paid in cash in the presence of the Panchayat. DW-3 Sudhir Sharma states that the payment was made after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property to Furu Ram and another half to Kalu Ram for a consideration of ₹ 8,00,000 plus ₹ 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 ₹ 800,000/- advanced to each appellant. Therefore, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs (appellants) that they had received ₹ 8,00,000 from Furu Ram and ₹ 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 ₹ 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 : &qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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