TMI Blog1999 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... show that the settlement agreement on the award did not require filing of any declaration under Chapter XX-C of the Income-tax Act. Moreover, in our view in the case of a foreign award, the provisions of Chapter XX-C of the Income-tax Act are not attracted. It was said that under Chapter XX-C a net has been thrown wide to bring within its purview all sorts of immovable properties but that net is not wide enough to cover a foreign award covering businesses and properties both in India and in a foreign country. The apprehension of Mr. Ganesh that if we give this interpretation a method can be found by the parties to escape the rigour of Chapter XX-C knocking at the very provision of law which strikes at the root of black money rampant in the sale and purchase of immovable property. If that is so, the Legislature can always step into block the gap if it finds there is any escapement of revenue. We are also of the view that a foreign award under the Foreign Awards Act does not require registration under the Registration Act. A decree or order of a court does not require registration under clause (b) of sub-section (1) of section 17 of the Registration Act. This is the effect of cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. The High Court after contest ordered the award to be filed and pronounced judgment according to the award as required under section 6 of the Foreign Awards Act. Harendra finds himself aggrieved by the judgment. That is how the matter is before us. We may now consider the controversy between the brothers in detail. Harendra and Mukesh were having vast businesses in the U.S.A and India. They also acquired properties in both the countries. Disputes having arisen, they decided to divide and distribute their jointly held assets. Both have equal share in all the properties and businesses. On October 25, 1989, they entered into an agreement to refer their disputes to their elder brother, Lalit Mohan. Their submission to the arbitrator is in the following terms : "Lalit Mehta, 48, Arbor Lane, Roslyn Hts., New York 11577. Dear Lalitbhai, We, Harendra Mehta and Mukesh Mehta hereby appoint you as our sole arbitrator for the following difference of opinions. They are related to : 1. All our business in U.S.A. and India. 2. Social relationship. Your award in the matter shall be binding on both of us and our legal heirs. In areas where you need any assista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in accordance with the selection of packages. The parties were to execute transfer and closing documents in terms of the award. The forms in which the documents were to be executed were also prescribed. It was also agreed that the parties shall execute, from time to time, any and all further documents that may be required at any time to effectuate the award made in pursuance of the agreement. On refusal of any of the parties to execute the transfer and closing documents, it was agreed that Mr. Vinod Mehta shall be duly appointed attorney of each of the parties to execute the transfer and closing documents. There was also a penalty clause in case of failure or refusal to execute the transfer and closing documents. That was irrespective of any other remedy open to the parties. Mukesh opted for the package B+A-1. On March 20, 1990, itself, the arbitrator rendered his award after the proceedings were held under CPLR 7507 incorporating the aforesaid settlement agreement of the same date. CPLR 7507 provides that the award shall be in writing, signed and acknowledged by the arbitrator making it within the time fixed by the agreement, or if the time is not fixed, within such time as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a foreign award. Harendra raised various pleas in opposition thereto. The High Court after elaborate discussion rejected all of them and ordered that the award be filed and proceeded to pronounce judgment according to the award and thereafter decree followed. Mr. Ganesh, learned counsel for the appellant, submitted that the High Court could not order the award to be filed and give judgment in terms thereof. His objections to the impugned judgment were : 1. It is not an arbitral award inasmuch as there was no dispute on the basis of which the arbitrator could give his award. The arbitrator merely acted as a rubber stamp. 2. It is not an award under the Foreign Awards Act as the award is merely effecting a family settlement. It is not of commercial nature. The dispute did not arise out of any international trade. 3. Chapter XX-C of the Income-tax Act, 1961, has been violated and the enforcement of the award in violation of the law of this country would be against the public policy. 4. The award merged in the foreign judgment of a New York Court which modified the award. So only the judgment could be enforced. 5. A fraud has been committed in getting the award and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eck on proliferation of unaccounted money. It is stated that this Chapter was introduced in order to tackle the extremely grave .problem of rampant tax evasion and generation of black money which is then utilised for acquisition of immovable properties at prices which are shown to be far below their real market value. The mere fact that the documents of conveyance/exchange/ lease are to be executed subsequently in pursuance of the said "agreement for transfer" is of no relevance or consequence at all. In fact, such documents of conveyance can be executed only if and after the requisite no objection certificate (NOC) under the provisions of Chapter XX-C is issued. The scheme of Chapter XX-C is that once an "agreement for transfer" has been entered into, the parties have to mandatorily comply with the requirements of Chapter XX-C and are prohibited from effecting "transfer" of the property without first complying with the provisions of Chapter XX-C, that is to say, filing the section 269UC statement within the specified time and obtaining the requisite NOC from the appropriate authority. It was submitted that the only situation in which Chapter XX-C does not apply is where the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1990, attracted the provisions of Chapter XX-C of the Income-tax Act and, thus, it mandatorily required compliance with the provisions of that Chapter. The award was at best only a consent award which stood on no better footing than or on the same footing as a consent decree. He said in view of the decision of this court that a consent decree is nothing but a private agreement between the parties and that the seal of the court which is added thereto does not in any manner change its character or effect in law. In Baldevdas Shivlal v. Filmistan Distributors (India) Pvt. Ltd., AIR 1970 SC 406, this court was considering whether a consent decree operates as res judicata. It said that a consent decree does not operate as res judicata as it is merely the record of a contract between the parties to a suit to which is super-added the seal of the court and that a matter in contest in a suit may operate as res judicata only if there is an adjudication by the court. The court said that the terms of section 11 of the Code of Civil Procedure left no scope for a contrary view. On this, Mr. Ganesh based an argument that the award was nothing but a contract which contained transfer of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he award was not registered, the court cannot look at such an award or pass a decree in terms thereof. Reference was made to a decision of this court in Lachhman Dass v. Ram Lal, AIR 1989 SC 1923; [1989] 3 SCC 99. It was, thus, submitted that since the award in the present case was not registered, the impugned judgment and decree passed which are in terms of the said unregistered award are to be set aside. The judgment of this court in Tehmi P. Sidhwa v. Shib Banerjee and Sons Pvt. Ltd., AIR 1974 SC 1912 ; [1974] 2 SCC 574, was sought to be distinguished. Section 269UC of Chapter XX-C prohibits registration of a transfer unless the requisite NOC is obtained. In Lachhman Dass v. Ram Lal, AIR 1989 SC 1923 ; [1989] 3 SCC 99, there was a dispute between the brothers respecting a certain piece of land which stood in the name of the appellant. The claim of the respondent was that it was benami in the name of the appellant. They set an arbitrator who gave his award and then filed the same in the court for making that rule of the court. One of the objections raised by the appellant was that the award was bad and unenforceable. It was not properly stamped nor was it registered and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ukesh Mehta Hindu undivided family ; (3) Mettaco Enterprises Trust; and (4) A. D. Developments Ltd., a New York Corporation having its principal office at New York. The settlement agreement runs into 57 long pages. It is a complex agreement. It also mentioned litigation between parties pending in the Supreme Court of the State of New York, Nassau County Court. After the parties have got their respective packages of the properties and businesses both in India and in the United States the award required the parties to execute transfer and closing documents. In this respect, clause 5 of the settlement agreement would be relevant and is as under : "Further, at the closing, the parties will execute transfer and closing documents to be mutually agreed to by the parties' respective attorneys. If the parties' attorneys cannot agree on the sum and substance of the closing documents, the firm of Skadden, Arps, Slate, Meaghr and Flom, or if they refuse the firm of Simpson, Tacher and Bartlett shall choose the appropriate transfer and closing documents and the choice made by this firm shall be binding upon the parties of this agreement and the cost of any consultation or assistance in prepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling of any declaration under Chapter XX-C of the Income-tax Act. Moreover, in our view in the case of a foreign award, the provisions of Chapter XX-C of the Income-tax Act are not attracted. It was said that under Chapter XX-C a net has been thrown wide to bring within its purview all sorts of immovable properties but that net is not wide enough to cover a foreign award covering businesses and properties both in India and in a foreign country. The apprehension of Mr. Ganesh that if we give this interpretation a method can be found by the parties to escape the rigour of Chapter XX-C knocking at the very provision of law which strikes at the root of black money rampant in the sale and purchase of immovable property. If that is so, the Legislature can always step into block the gap if it finds there is any escapement of revenue. We are also of the view that a foreign award under the Foreign Awards Act does not require registration under the Registration Act. A decree or order of a court does not require registration under clause (b) of sub-section (1) of section 17 of the Registration Act. This is the effect of clause (vi) of sub-section (2) of section 17. Earlier under this clau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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